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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: Paul Lee who wrote (2148)	3/7/1999 6:20:00 PM
From: Chris Stovin	Read Replies (1) \| Respond to of 14638

...and here is the related article from Forbes.com... By Vicki Contavespi In the competitive world of telecommunications there are only a handful of key players. The role equipment makers play in developing and building the increasingly complex machines that govern telecommunications' networks will only grow as government and corporate demand for bandwidth grows. The big names in this billion-dollar industry are Linthicum, Md.-based Ciena Corp. (nasd: CIEN) and Murray Hill, N.J.-based Lucent Technologies (nyse: LU), the R&D powerhouse that was spun off from AT&T (nyse: T) on Oct. 1, 1996. But there is another important player in this market that has been ignored until recently: Brampton, Ontario-based Nortel Networks (nyse: NT), a $17.6 billion (1998 sales) telecommunications company with an emphasis on wireless and dense wavelength division multiplexing technologies and equipment. The company has been around since 1895 but, as a result of a lackluster marketing program, a series of botched products in the early 1990s and a failure to communicate effectively with the financial community, it hasn't been given its due on Wall Street. It's time to take a second look. Nortel is a systems vendor that sells telecom equipment to major carriers like AT&T, Sprint (nyse: FON), Qwest (nasd: QWST) and MCI WorldCom (nasd: WCOM). In the $2.5 billion dense wavelength division multiplexing arena, it has virtually the same market share--40%--as Lucent Technologies, which is more than three times its size. However, when talking to people in the industry, Ciena and Lucent always seem to be the first companies mentioned. "You hear about them more than anyone else," says Zia Daniell Wigner, a telecommunications analyst for New York's Jupiter Communications. -------------------------------------------------------------------------------- Nortel is a systems vendor that sells telecom equipment to major carriers like AT&T, Sprint, Qwest and MCI WorldCom. -------------------------------------------------------------------------------- Understandably, Nortel's market capitalization is just $41 billion, while rival Lucent commands a valuation of $142 billion. To boot, Lucent has the huge Bell Labs research facility behind it, and it recently bought Ascend Communications (nasd: ASND), which is a rival in the router market to both Cisco (nasd: CSCO) and Canada's Newbridge Networks (nyse: NN), for some $20 billion. On the other side is the much smaller Ciena, with a market cap of $2.5 billion. However, Ciena was first to market with a fiber optic, wavelength division multiplexing product that could cram 40 billion bits of information down a single strand of glass. Such victories mean a lot in telecommunications, because once a carrier has picked a vendor it usually stays with it. Being the first to market pulls in a lot of business, and that attracts positive attention from the financial community. Nortel's brush with possible disaster came about in the early 1990s. The company "crashed and burned," according to SG Cowen analyst James Kedersha, "mainly because [management] wasn't pushing new product development and was late with a lot of new products." TD Securities' vice president and technology analyst Paul F. Litva, based in Toronto, recalls that Nortel's then-CEO, Paul Stern, was "driving the company too hard while under-investing in R&D." To dig itself out, the company had to accelerate R&D spending, which naturally took its toll on earnings. Nortel also had product problems, primarily with its central office switch software, which became an unwieldy and massive program that had to eventually be put into modules, or blocks of functionality. The bottom line was that Nortel didn't spend the money to maintain the software's architecture, says Litva. John Roth came on as CEO about a year ago and started repairing things, but there was still the problem of communicating with the financial community. Last fall things came to a head. At Nortel's annual meeting for analysts, held at New York's Essex House on Sept. 29, 1998, Nortel executives announced the company's earnings--but did not mention that the numbers didn't include the recently acquired Bay Network's financials. "No one asked if our numbers included Bay's," says Peter Janecek, spokesman for Nortel.