fwiw, TLAB is cited in this H&Q report.
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Communications Equipment Providers Poised for New Growth
Tuesday June 8 9:00am
PR Newswire
Hambrecht & Quist Report Cites Internet-Driven Capacity Demand on Carriers, The Customers of Equipment Providers Consolidation, Barriers to Entry, Favorable Investment Factors H&Q Initiates Coverage With Recommendations on Eight Providers
SAN FRANCISCO, June 8 /PRNewswire/ -- The following is being issued by Hambrecht & Quist, a member of the National Association of Securities Dealers, CRD number 940:
Demand for network carrying capacity, driven by rapidly expanding use of the Internet, is forcing phone companies and other carriers to upgrade their networks and communications equipment providers are set to benefit, a new research report from Hambrecht & Quist said today.
The report, The Communications Equipment Industry, marked initiation of coverage of the sector by H&Q. Analysts Michael Neiberg and Ilya Grozovsky cite a combination of demand on carriers for data carrying capacity, consolidation among providers of communications equipment to those carriers, and the emergence of new niche markets for equipment providers in recommending companies who sell equipment to carriers.
"Phone companies, both incumbent and emerging, are being forced to spend capital to build and upgrade networks to handle the ever increasing flow of data traffic," say the authors. "Simultaneously, the companies within the Communications Equipment industry itself are consolidating, resulting in a rapidly changing sector that we believe will continue to produce outstanding investment opportunities."
The 71-page report rated ADC Telecommunications, ADTRAN, Inc., AWARE, Inc., Lucent Technologies and Tellabs, Inc., with buy recommendations, and rated Newbridge Networks, Nortel Networks and PairGain Technologies as a market performers.
The H&Q analysts cited these factors, among other favorable general industry factors, in their report:
* Bandwidth Boom. Soaring Internet usage, falling PC prices, and residential broadband access with cable modems and digital subscriber lines have produced a major upgrade cycle among phone companies and other carriers to meet demand. "The 'Bandwidth Boom,'" say the authors, "is affecting virtually every aspect of network architecture and changing the design of the next generation of networks."
* New Carriers. The H&Q analysts say 2,000 new carriers -- new customers for communication providers -- have emerged globally in the last few years, according to the H&Q analysts, half of them in the United States. "These emerging carriers infuse the industry with additional buyers of equipment and increase competition among carriers," say the authors. "Increased competition lowers prices and causes additional usage, creating a spiral demand effect."
* Rising Carrier Capital Spending. The H&Q report estimates capital spending by carriers for 1999 at $68.4-billion, a year-over-year growth of 11%. The authors say capital spending budgets increased at virtually all incumbent US carriers in 1999, led by Bell operating companies meeting Internet usage demands and access line growth. Demand dynamics cited include emerging carrier network use of new technology and the inevitable shift by incumbent carriers to that technology, as well as Y2K compliance.
* Consolidation Among Equipment Providers to Carriers. International communications providers see the North American market as the most attractive and will be looking to acquire North American distribution and offer product lines where domestic equipment makers are weak, says the H&Q report. Additionally, say the authors, domestic producers will be buying start-up companies to broaden product lines. The consolidation, plus an increasing need for equipment manufacturers to provide financing to carriers for equipment purchases has raised barriers to entry to the sector.
* Attractive New Equipment Sectors. At the same time, say the authors, new niches -- such as high-speed residential access where there are essentially no incumbents or existing areas where new companies are adding functions to existing product. "By adding functions," say the H&Q authors, "these niche layers ate essentially blurring the distinctions between traditional switching, transmission and access segments."
Source: Hambrecht & Quist Group
Contact: Carole Newman of Hambrecht & Quist, San Francisco, 415-439-3611 or cnewman@hamquist.com; or Philip Keuper of Keuper Public Relations, New York, 212-207-1576 or pkeuper@hamquist.com, for Hambrecht & Quist. |
