The Black Box

[hardcore]

Lucent Could See 'Significant' 2007 Revs From IMS
Ed Lin, 11.08.05, 11:10 AM ET

UBS Investment Research analyst Nikos Theodosopoulos maintained a "neutral" rating on Lucent Technologies (nyse: LU - news - people ) and a $3.10 price target.

Theodosopoulos noted in a research report that Lucent "has momentum" in IMS-based (IP multimedia subsystem) solutions, but it likely won't be a factor until 2007.

Tuesday morning, Lucent said it won a contract to provide BellSouth (nyse: BLS - news - people ) with an IMS-based solution for a voice over IP service for residential customers in its nine-state territory.

"With this win, Lucent has now won IMS contracts with Cingular Wireless, SBC Communications (nyse: SBC - news - people ), and BellSouth, and is gaining momentum in the IMS market after not being involved in any of the initial VoIP rollouts by RBOCs," Theodosopoulos said. Cingular is a joint venture of SBC and BellSouth.

"We next look to China Mobile (nyse: CHL - news - people ) for an IMS decision with Lucent and Ericsson (nasdaq: ERICY - news - people ) as the main contenders," he said. "While the Street expects a Verizon Wireless IMS decision by year-end, we think Verizon is not likely to decide on IMS until mid-2006." The analyst thinks the joint ownership of Verizon Wireless by Verizon Communications (nyse: VZ - news - people ) and Vodafone (nyse: VOD - news - people ) "will likely delay an IMS decision," although Lucent will be "the favorite" when the Verizon Wireless request for proposals is issued.

Initial revenue from Lucent's latest IMS wins will likely be in the range of $50 million to $75 million, or less than $10 per telecom subscriber. "Revenue surrounding new services via application/feature servers would be incremental to this initial revenue and will be based on penetration of IMS services. Thus, we view the IMS revenue opportunity to be minimal in 2006 and we believe [there] could be significant [revenue] in 2007 and beyond as adoption ramps," Theodosopoulos.

http://www.forbes.com/markets/2005/11/08/lucent-ims-earnings-1108markets05.html?partner=yahootix
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This should be a boon for SONS , probably the IMS leader, and other telecom infrastructure stocks.I'm not a fan of SONS valuation, but it looks like they will support multi-billion dollar valuation. Looks like telecom has bottomed around here