"Tyco: The Road Back"
Busniness Week - April 10, 2000 issue
Tyco International Chairman Dennis Kozlowski aims to get back in
investors' good books. The stock took a beating after allegations that
Tyco (TYC) engaged in accounting irregularities in its acquisitions,
which Kozlowski denies. The Securities & Exchange Commission is
looking into the charges. The stock, which had been in the mid-60s,
closed at 28 1/4 on Dec. 9. It has since rallied, to 49 7/8 on Mar. 29.
What's Kozlowski's strategy? He has shifted gears, stressing Tyco's
New Economy operations. Conglomerate Tyco is in health care, valves,
fire protection, and security. Tyco also makes plenty of high-tech
products: undersea fiber-optic cable and wireless telecom and
electro-optic connection devices. But the market hasn't recognized their
true worth.
So Kozlowski is taking two of Tyco's high-tech units public. Tyco has
filed to sell 20% of TyCom, which is No. 1 in undersea fiber-optic cable.
The IPO will sell $1 billion of stock. Kozlowski says he also plans to
take public M/A-COM, whose products are sold to the broadband
telecom, automotive, and aerospace industries. Kozlowski, who has
bought companies worth $30 billion over just three years, intends to
forge ahead with acquisitions: He expects to tie up two deals this
year--in the electronics and technology sectors, to complement Tyco's
fiber-optics and telecom operations.
Tyco's stock soared eightfold in the five years ended Sept. 30,
1999--prior to claims of questionable accounting. Analyst Phua Young
of Merrill Lynch, who rates the stock a long-term buy, says Tyco's
move to associate itself with the New Economy, plus its strong
fundamentals, should drive the stock higher. His 12-month target: 95, or
35 times his 2001 estimate of $2.70 a share. In 2000, he sees earnings of
$2.13.
By GENE G. MARCIAL
businessweek.com
Mang |
