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Technology Stocks : PairGain Technologies

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To: Larry J. who wrote (36069)	2/24/2000 11:22:00 AM
From: max power	Read Replies (1) of 36349

another view: ADC Strengthens Broadband Position Todd Truitt Feb 24 2000 ADC Telecom (Nasdaq: ADCT) announced Wednesday that it will acquire PairGain Technologies (Nasdaq: PAIR) in an all-stock transaction. The agreement states that each share of PairGain common stock will be converted into 0.43 shares of ADC stock, valuing the deal at approximately $1.6bn as of Wednesday?s close. ADC's stock was down 6% Wednesday on the news as investors expressed concerns over earnings dilution. However, we feel this decline presents a buying opportunity, as the acquisition appears to be a sound strategic move. PairGain designs, manufactures, markets and sells DSL networking systems. Service providers and private network operators worldwide use the company's products to deploy DSL-based services such as high-speed Internet, remote LAN access and enterprise LAN extension. PairGain will bring 1.7m DSL customers to ADC. This strategic move strengthens ADC?s position as a leading global broadband equipment supplier in a market that is expected to grow 47% annually over the next four years, according to the Yankee Group. The demand for broadband will continue to exponentially drive the revenues and EBITDA (a measure of cash flow) of ADC and other telecom equipment providers for years to come. PairGain reported 1999 earnings of $2.4m on sales of $225m. Surprisingly, ADC does not expect the merger to dilute its own earnings in 2000 and anticipates the deal will be $0.05 accretive in 2001. We believe this was a smart purchase by ADC. The company continues to impress us not only on a strategic front, but also on a financial front (ADC beat revenue, EBITDA, and operating margin expectations for 4Q99). FWD this page to:

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