Briefing.com report from the AEA conference :
TELLABS (TLAB) 58 1/16 -13/32. From the AEA conference in San Diego: Briefing.com's representatives at this key tech conference started off the day in the Tellabs' room, where CEO Michael Birck was delivering a relatively upbeat outlook for the telecom equipment maker. Birck emphasized that Tellabs' future was bright despite the breakdown of the Ciena (CIEN) merger. Birck noted that a new Titan product was coming out next year that offered good growth opportunities. He was also optimistic concerning capital expenditure plans by major Tellabs' customers. The RBOCs were seen increasing their capital spending by 4-6%, and while IXC spending was expected to be flat, much of that weakness was due to AT&T, which is not a Tellabs' customers. Sprint and Worldcom, which are customers, were seen spending relatively aggressively in 1999. Birck's feeling was that if you build a better mousetrap, the spending would be there, and he obviously felt that Tellabs' products would continue to find demand. In terms of regions, the US and Europe were seen as strong. Mexico was also solid due to aggressive spending plans at Telmex (TMX), but the rest of Latin America was more questionable. Tellabs does not do much business in Asia, but Birck did see China and Hong Kong holding up relatively well. Finally, Birck saw opportunities created by the merger of competitors Alcatel and DSC, as many customers of those companies have been coming to Tellabs to backup Alcatel/DSC orders, as there are concerns that the merger will lead to delivery delays. On margins, Birck said that the 64% margins of Q3 were not sustainable, but he quickly noted that he said the same thing about 55%, 60%, and 63% margins in the past. Margins still look unsustainable, but they keep going up. Briefing likes Tellabs, and the AEA presentation certainly doesn't change our view -- the outlook for 1999 is bright, and it looks as if the company is quickly putting the Ciena fiasco behind it. |
