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Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: Jack Jackson who wrote (482)	3/3/1999 3:01:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 3891

Market hails Alcatel's Xylan buy but awaits follow-up ReutersPlus, Wednesday, March 03, 1999 at 14:23 By William Emmanuel PARIS, March 3 (Reuters) - Investors hailed Alcatel's (SBF:CGEP) $2.0 billion agreed cash bid for internet equipment maker Xylan (NASDAQ:XYLN) on Wednesday, sending the share up by 10 percent, but analysts said the French group still has to complete its Internet line-up. "Alcatel stands to benefit from the strong profitability of Xylan (with an operating margin of 15.9 percent compared to 13 percent for Cabletron (NYSE:CS), 25 percent for Cisco (NASDAQ:CSCO) and 4.7 percent for Alcatel) and contribute to the recovery of the enterprise and consumer division," said research bureau IFF in a note to clients. Alcatel rose 7.49 percent to 109.1 euros having earlier reached a high of 114.30 and having been suspended limit up. Analysts said that while the operation is positive, the share rise was exaggerated and futher acquisitions were needed to really compete with Lucent (NYSE:LU), Nortel/Bay (TSE:NLT) or Cisco. "The main factor behind the rise to day is a change in the appreciation of the share. But it is exaggerated, we see a small correction of an excessive downward movement," said a French bank analyst, referring to a 38 percent one-day fall on September 17 after a profit warning. Jean-Laurent Bruel, fund manager of Banque Privee Quilvest, said there was a "re-evaluation of the share for fundamental reasons. Alcatel has been massacred to such an extent that it was poorly represented in portfolios." Traders said the share was still trading at a discount of 50 to 60 percent to its main rivals. One analyst said that with a discount of 30 percent, Alcatel would trade at 135 euros, still far away from its historic high of 217.24 euros of July 16, 1998. Analysts also said the group had improved its communication with the markets after the September plunge which had damaged the credibility of Chairman Serge Tchuruk. The Xylan buy "is the materialisation of an Internet oriented strategy," said a trader at a Paris brokerage. "It shows that Alcatel is back on the right track but other acquisitions have to follow," he said, adding an announced pending acquisition in remote-access would not be enough. "Alcatel has to make more acquisitions and it has the means for it," said another trader, noting the group had a gearing of three percent. The bank analyst also said further acquisitions were needed and added the market was now looking forward to the March 11 presentation of the final results for 1998 where Tchuruk could further expand the Internet strategy. Wednesday's alliance with Dialogic Corp (NASDAQ:DLGC), to develop a technology platform to combine a the telephone, computer and Internet functions for small and medium-sized companies was "interesting" but remained fragile. "Alcatel does not need alliances but acquisitions," an analyst said, noting Lucent's recent acquisition of Ascend which had been an Alcatel ally. paris.newsroom@reuters.com)) Copyright 1999, Reuters News Service