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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: Finder who wrote (6212)	2/11/1999 9:20:00 AM
From: Kenneth E. Phillipps	Read Replies (2) \| Respond to of 21876

Does sizzle sell over substance? Is Lucent Really Worth Such a Wide Premium Over Nortel? By Herb Greenberg Senior Columnist 2/11/99 6:30 AM ET An item earlier this week quoted several analysts who think Lucent (LU:NYSE) is overvalued based on its fundamentals. Here's a different twist on the same story: Either Lucent is overvalued or Northern Telecom (NT:NYSE) is undervalued. They're both the closest thing the other one has to a direct competitor, and they're both projecting similar earnings growth rates. Yet Lucent trades at roughly 45 times trailing earnings compared with 25 times for Nortel (accounting for takeover charges). Why the discrepancy? Other than the fact that Nortel has a lousy reputation on Wall Street after bagging analysts a few months ago, and other than the fact that Lucent has done a far better job putting a positive spin on negative news, and other than fact that Nortel is simply a name people don't want to hear -- nothing. In fact, "I would say Nortel has better long-term prospects if you look at its product lines," says Truc Do, an analyst at Soundview Technology, who ranks Nortel a strong buy; his firm ranks Lucent a mere buy. Both companies actually traded at fairly similar multiples when Lucent was spun off by AT&T (T:NYSE) two years ago. The trouble, and the spread, started early last year when Nortel's international market, which accounts for 40% of revs, started to slide. Lucent had much smaller overseas exposure, and it received an added boost from its wireless business. Then, any ounce of credibility Nortel had was shot to pieces at an analyst meeting Sept. 29, when an otherwise impressive presentation in terms of products was botched by the CFO's clumsy attempt to downplay that the company's second-half revenue growth wouldn't be what Wall Street expected. (Sure enough, it wasn't.) "It created big confusion," says Do, who used to work at Bell Labs before it became part of Lucent. However, Nortel has a new CFO, and several analysts believe the company is actually better positioned than Lucent going forward, especially in broadband technology. (Lots of disagreement over that issue; don't forget, Lucent is acquiring Ascend (ASND:Nasdaq) to forge into data networking.) Do believes Nortel's 10-gigabit-per-second "transport system" for carrying voice and data over the Internet will show rapid growth, while Lucent's mainstay wireless biz will mature. "Broadband has good growth left in it for several years," he says. Meanwhile, last quarter, Nortel's days outstanding of receivables dropped to 90 days from 100, while Lucent's rose to more than 100 from 90. Lucent, however, has one thing Nortel doesn't have: the smooth salesmanship of CEO Rich McGinn. Nortel President John Roth is an engineer. "But he's an operating guy with technology-savvy outlook," Do says. Perhaps, but right now sizzle sells over substance.

To: Finder who wrote (6212)	2/11/1999 9:42:00 AM
From: William Hunt	Respond to of 21876

Finder ---- Nothing new being said in the article . All of the items have been discussed before ( technical , receivables , CEO MCginn ) . LU is a first tier company while NT is a second tier company . Similar to the debate between ASND and CSCO about who was the best . The world changes and now the TWO companies to beat in the marketplace are CSCO and LU . Both have their detractors and supporters---both will be winners . On a more positive note I really am looking forward to this qtr results (Usually the best way to quiet detractors ) . Should find out a lot about this qtr at the LU shareholders meeting next Wednesday . BEST WISHES BILL