DRIP PORTFOLIO
After Nortel's Fall

George Runkle recently met with Mr. Anil Khatod, president of Global Internet Solutions at Nortel Networks. Today, Mr. Khatod shares his thoughts on the future of the wireless Internet and other market opportunities for Nortel. Tomorrow, in part two, we discuss Nortel's leadership and the hysteria that has moved Nortel and other stocks.

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By George Runkle (TMF Runkle)
October 31, 2000

Last week, I began to share the views of Mr. Anil Khatod, president of Global Internet Solutions at Nortel Networks (NYSE: NT), regarding the future of the optical Internet. Following that article, Nortel's stock fell more than 20% on word of slower-than-anticipated revenue. Is Nortel's future less than bright? I don't think so.

Today we share Mr. Khatod's vision regarding the future of the wireless Internet and we talk about where Nortel is in the market and where it's heading. At this time, in the United States, he said that, "98% of [wireless] traffic is voice," however, "the consumer is looking for the same Internet experience in the mobile world."

Mr. Khatod told us Nortel projects that users attached to the Internet through wireless devices will grow to 500 million in 2003, up from just 12 million today. He said there are "8 billion microprocessors around the world that want to talk to each other." This growth will lead to the demand for an increasing wireless infrastructure and Internet infrastructure.

He mentioned Nortel's IBT product -- software-defined radio that is compatible with the second generation of wireless. It can meet all protocols, and takes away the complexity of managing the system. He also stated that Nortel has the highest win rate in the third-generation (3G) wireless space.

Right now, we are in 2G wireless -- that is digital wireless. The first generation was analog. 3G is going to be "greater bandwidth, more sophisticated compression techniques, and the inclusion of in-building systems," according to Newton's Telecomm Dictionary.

Nortel's objective is to make service providers more profitable by providing a lower cost of infrastructure, the most cost-effective base station, and by bringing them richer applications.

To aid in this, we are continually seeing an increase in throughput and speed. A cell phone has 9.6 Kbps throughput today and, when we get to 3G, we'll see speeds of 384 Kbps while moving and 2 Mbps while stationary. Mr. Khatod states that Nortel provides "total fulfillment" by being able to design a network from end-to-end and being able to assist in managing the network.

Mr. Khatod mentioned Nortel's "Wings of Light" program, which is "to enable IP-based services to be delivered over the air and leverages the power of high performance," according to the press release dated June 19, 2000. Cutting through the public relations language, basically it is a program that Nortel will provide that includes end-to-end services in all areas of communication, such as "optical Internet, wide-area wireless access, network management, and enterprise voice and data services."

What will the wireless Web be used for? Pretty much the same thing we're squeezing out of the Internet today, with more streaming video, location-based services, and Web browsing. We'll talk more about that and about the "local Internet" tomorrow. We'll also discuss what Mr. Khatod described as "Nortel's leadership categories," and the hysteria surrounding these industry stocks.

Meanwhile, if all the talk you hear about wireless and fiber optic hardware is confounding you, consider recent issues of the Motley Fool Research Internet Report. The most recent issue analyzes and explains fiber optic hardware. The focus companies in the analysis are Nortel, JDS Uniphase (Nasdaq: JDSU), Corning (NYSE: GLW), Lucent Technologies (NYSE: LU), and Avanex (Nasdaq: AVNX). These stocks have gotten hit in the past week -- is there a better investment opportunity now?

Another recent issue of the Motley Fool Research Internet Report covered the Wireless Web and companies such as InfoSpace (Nasdaq: INSP).

These issues of analysis and education are $20 apiece, with a money-back guarantee if you're unsatisfied. Or, a one-year subscription of all 12 issues looking at the most dynamic industries related to the Internet is just $75, or about $6 per issue.

Finally, if you haven't seen the Fool's new telecom sector pages -- with lessons about the industry overall -- check it out!

Drip Portfolio


10/31/00 as of ~8:30:00 PM EST

Ticker Company Price
Change
Daily Price
% Change
Price
CPBCAMPBELL SOUP(0.13)(0.43%)29.25
INTCINTEL CORPUnchg.Unchg.45.00
JNJJOHNSON & JOHNSON(2.25)(2.38%)92.13
MELMELLON FINANCIAL CORP1.503.21%48.25
PEPPEPSICO INC(0.69)(1.40%)48.44

  Day Week Month Year
To Date
Since
7/28/1997
Annualized
Drip0.28%1.38%6.52%18.47%53.91%14.13%
S&P 5002.20%3.61%(0.49%)(2.71%)52.26%13.75%
S&P 500 (DA)2.16%3.55%(0.49%)(2.67%)54.88%14.35%
NASDAQ5.58%2.78%(8.25%)(17.19%)114.68%26.38%

Trade Date # Shares Ticker Cost/Share Price Total % Ret
9/8/9748.4286INTC23.7645.0089.74%
10/7/9837.3159MEL34.7748.2540.24%
11/14/9715.694JNJ79.6992.1316.88%
7/28/005PEP48.0048.440.91%
4/13/988.403CPB53.9829.25(44.26%)

Trade Date # Shares Ticker Total Cost Current Value Total Gain
9/8/9748.4286INTC1,150.432,179.291,032.45
10/7/9837.3159MEL1,297.431,800.49522.14
11/14/9715.694JNJ1,250.711,445.81211.16
7/28/005PEP240.00242.192.19
4/13/988.403CPB453.61245.79(200.75)
 
Cash: 
Total: 
Unchg.
5,913.57
 


Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.

Note
Drip Port launched with $500 on July 28, 1997, adds $100 to invest every month, and the goal is to own $150,000 in stock by August of the year 2017. Due to the slow nature of dollar-cost-averaging and our relatively significant starting costs, we do not expect to seriously challenge the S&P 500 for the first three to five years as we build an investment base. The long-term advantages of dollar-cost-averaging still overcome the short-term disadvantages, however. Final note: our investment in Campbell Soup is frozen due to fees instituted in its investment plan. Click here for a history of all Drip Port transactions.