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.
You re so correct. I purchased a few shares of LU when it first started. I have since took my initial investment out and now have $23,000 pure profit and will continue to let it ride. You don't kill the goose that is laying the golden eggs. Virgle