We expect even more of a shake-out in the "super-premium" tech category, with investors insisting on 1) real earnings either now or imminently arriving, 2) stable or improving profit margins, 3) leadership positions in niches that are not overly vulnerable to new entrants, and 4) revenue and earnings growth rates that are not decelerating. Four "super-premium" names (ISSX-$72 5/8, 1H4, TXCC-$58,1H3, TLGD-$132 3/8,1S2, and DIGL-$69 1/16,2S4) currently satisfy these requirements.
ADTN, ADCT
ADTN - Adtran Inc., $43 7/8 Rated 1H3
FY00 $1.89E vs. $1.31 First Call consensus $1.90
Greg Mesniaeff 404.266.6344
 ADTN has 70% market share in HDSL and is growing earnings at 30% YoY.
 ADTN is trading at a modest 20x our 2001 EPS estimate of $2.21
 We believe the quiet catalyst for this stock is the transition from 4 wire to 2 wire HDSL.
ADCT - ADC Telecommunications, $32 3/8 Rated 1H3
FY00 $0.53E vs. $0.31 First Call consensus $0.54
Greg Mesniaeff 404.266.6344
 ADCT stock price has been weak lately. It is off a high of about $48 in late July. We believe that general price weakness is due to concern about a slowdown in carrier spending on telecom infrastructure. We believe that investors should take advantage of this price weakness for 4 reasons:
 1) We do not think that the recent acquisitions of BA Systems will be as dilutive as commonly expected. Furthermore, we believe that BA Systems should contribute revenue of $100 mm next year.
 2) With the acquisition of BA Systems, ADCT is now "king of the last mile."
 3) The company has limited exposure to the Euro with less than 10% of revenues derived from European sources.
 Trading at just 45x next year's number, ADCT is trading at only a slight premium to its 40% growth rate and at a discount to its high quality peers.
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