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To: SteveG who wrote (31)	4/15/1999 3:22:00 AM
From: SteveG	Respond to of 1860

excerpt from a CSFB report today on Lucent: "...We would highlight the company's Public Carrier Networks (PCN) division and Microelectronics as the two segments of the company's business that posted the strongest quarterly performance. We estimate PCN posted year over year growth above the corporate average of 30% and that the Microelectronics business increased at approximately a 12% rate. For PCN, we believe Lucent's results in wireless networking systems and optical system products were particularly strong. As we outlined a week ago, publicly announced wireless orders jumped 29% year over year during the company's second fiscal quarter. In addition, the company's optical business is set to accelerate during calendar year 1999 based upon a diversification in the company's customer base, several new product introductions including Lucent's bandwidth manager system, and the emergence of significant opportunities in emerging segments of the market, including transoceanic telecommunications systems..."

To: SteveG who wrote (31)	4/15/1999 3:25:00 AM
From: SteveG	Read Replies (1) \| Respond to of 1860

and an excerpt from CSFB's note today on NT's acquisition of Shasta: Northern Telecom announced it will acquire privately-held Shasta Networks, a provider of intelligent IP networking systems, in a transaction valued at $340 million, which consists of $318 million in Nortel stock and up to $22 million in cash. The cash payment is contingent upon Shasta achieving certain business targets. We view this employee incentive as key for Nortel achieving a satisfactory return on its investment. The deal is expected to close in 30 days and will be accounted for as a purchase. Nortel management estimates the acquisition will be neutral to earnings in 1999 and accretive in 2000. Shasta's product platform will serve as a vehicle for enabling managed IP services, such as virtual private networks (VPNs), managed firewalls and QoS policies. The Shasta Subscriber Service System (SSS) is a modular, carrier- grade, integrated hardware and software platform capable of scaling to 160,000 subscribers. The architecture will give carriers the ability to provision channels dynamically in response to customers' bandwidth demands, as well as set up service-level agreements (SLAs) with both customers and other carriers. The system is currently in beta trials with several customers, including Frontier Corp., Rocky Mountain Internet, Finland's Telia and Sonera (formerly Telecom Finland) and is expected to begin shipping for revenue in early Q3:99. We project volume shipments will commence during H1:00. Competitors that have announced similar product offerings include CoSine Communications, Redback Networks, Torrent Networking Technologies, and TransMedia Communications. To date, Nortel has been an OEM customer of Redback's Subscriber Management System (SMS). Our checks indicate the Shasta platform is technically strong and we believe the company's management and engineering teams are first rate. Shasta Networks was founded by three former executives of Cisco Systems, Anthony Alles, Tom Daly, and Dr. Arthur Lin. Tom Daly, the company's Chief Technical Officer was previously VP of Engineering at Cisco, while Dr. Arthur Lin was the company's ATM switch architect. Prior to joining Shasta, Wu Fu Chen, the company's chairman and CEO, founded six communications equipment companies, including Cascade Communications (acquired by Ascend in 1997), Ardent Communications (bought by Cisco in 1997) and Arris Networks ( purchased by Cascade in 1996). We view the Shasta system as complementary to Nortel's current WAN packet networking initiatives, including the CVX 1800 remote access switch, Versalar 15000 IP edge router, Magellan Passport family of multi-service switches and the recently-announced Succession portfolio of carrier-grade IP telephony solutions. We believe the acquisition is consistent with Nortel's systems approach and demonstrates management's desire to aggressively assemble a compelling next -generation product portfolio. Reiterate BUY.