Nokia, Lucent Spur Latest Wireless Run

Upgrades boost two stocks that have already had quite a happy new year.
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Two more analysts jumped aboard the wireless rally wagon Wednesday, offering kind words about Nokia (NOK) - Get Report and Lucent (LU) .

A week ahead of Nokia's widely anticipated fourth-quarter earnings report, Merrill Lynch analyst Peter Dionisio raised his rating on the big Finnish gearmaker to buy from neutral. And Prudential Equity Group analyst Inder Singh raised his Lucent stock target price to $5 from $3.50, reaffirming his buy rating.

Lucent shares, which have now risen more than 40% this year, were up 3% to $4.04 in early trading Wednesday. Meanwhile, Nokia was up 2% to $20.95, putting it up 23% for the year.

This is the second round of

bullish calls from Wall Street analysts this week as they catch up to investors who have already started to

price in a recovery in networking-equipment sales, particularly wireless infrastructure.

Merrill's upgrade of Nokia cites improved prospects for the company's handset and networking businesses. The call isn't exactly a leap of faith, considering that last week Nokia released preliminary fourth-quarter predictions

calling for better-than-expected sales of phones and network gear.

Specifically, Merrill's Dionisio cited the improved average phone sales price, or ASP, trend at Nokia, which indicates rising sales of more expensive models. Dionisio also echoed several similar calls yesterday from analysts who are forecasting higher capital spending levels for the industry.

Prudential's Singh agrees that spending will increase this year and that Lucent's role as a key supplier to both wireless and conventional telcos will prove lucrative as demand improves. Singh also notes that Lucent is due a large sum of money from India's

Reliance

, a wireless phone company that is believed to have delayed its acceptance of Lucent gear for the past two quarters.

On Tuesday, analysts at Lehman Brothers and Sanford Bernstein said new number-portability rules, wider use of message- and photo-swapping services and a need to address poor network-service quality would prod wireless telcos to pull out their checkbooks and buy new gear this year.

During the last big tech-sector runup, in 1999 and 2000, observers confidently predicted an industrywide spending binge on a big buildout of so-called third generation, or 3G, services such as wireless Internet access. But that much-ballyhooed trend came to naught as whopping debts and funding shortfalls curbed equipment demand. Over the last year, though, the wireless service business has been improving, leaving network operators in a much stronger position, says Bernstein analyst Paul Sagawa.