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Alcatel-Lucent Message Board

  • Undoing_the_laces Undoing_the_laces Mar 20, 2000 9:32 AM Flag

    Don't sell Lucent shares

    If you own Lucent shares you may wonder why the
    stock isn't skyrocketing and you may even be
    considering selling the shares. At this point you must step
    back and ask yourself a few questions.

    - Why
    isn't this stock moving?

    The answer is simple -
    Lucent missed their earnings.

    - Why did they miss
    their earnings?

    I know the answer and will try
    to explain in maybe oversimplified terms: Lucent is
    constantly coming out with improvements and innovations in
    their product lines. When customers see these
    announcements, they are willing to wait for this latest
    technology even though it may be a delay of a few quarters.
    Unfortunately, for Lucent, some of these customers cancelled
    existing orders for the slightly older technology in order
    to wait for the latest and greatest. Lucent did NOT
    lose these customers - the income is just delayed one
    or two quarters in the fiscal year. That is why
    Lucent maintains it will meet expected earnings for the
    fiscal year.

    - Why didn't Lucent anticipate this
    and have manufacturing ramped up to produce the new
    products?

    This is difficult to explain but I have seen a change
    in customer attitude and purchasing habits. It used
    to be that no one wanted to be the guinea pig and be
    the first to try a new product. They would wait until
    someone else tried it and all the kinks were out of it
    before they bought. Or, they would put it a small part
    of their network and try it out before deploying it
    throughout. This has all changed and the change has been very
    recent. Now customers are clamoring for the latest from
    Lucent. Their need for greater bandwidth and speed plus
    their faith in the technology coming out of Lucent has
    caused this change to occur and I feel it was very
    difficult to anticipate.

    But, what a position to be
    in - The demand for your products is so great that
    it is difficult to keep up!!

    There is another
    huge reason that you should not sell - the spinoff.
    For every share you own you will get a share in the
    new company which has solid, steady, albeit not
    spectacular growth. All the business units are #1 or #2 in
    the world. Plus you will get a share of the new
    Lucent which is focused on fiber optics, wireless,
    microelectronics, DSPs, internet infrastructure, optoelectronics
    etc. The new Lucent will have 30% growth ( I believe
    that is conservative!) and if they reach the same PE
    ratio as their competitors, the stock price will be
    unbelievable.

    I will post a message 8 months from now (November
    20, 2000) and will refer to this post and simply say
    "I told you so".

    Today is March 20, 2000 and
    the price of Lucent stock (prior to spinoff) is $70.

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