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Technology Stocks : ADTRAN !?!

ADTN 9.255

+1.8%

Jan 16 3:59 PM EST

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To: James Young who wrote (432)	7/11/1997 9:33:00 AM
From: linda	of 766

Lehman Report on ADTN Headline: Adtran: Another Shortfall; But June Posts Record Bookings Author: Todd Koffman 1(212)526-2499 Company: ADTN, PAIR Industry: TELECM Ticker : ADTN Rank(Prev): 1-Buy Rank(Curr): 1-Buy Price : $25 5/8 52wk Range: $75-21 Price Target: $25 Today's Date : 07/08/97 Fiscal Year : DEC ------------------------------------------------------------------------------ EPS 1996 1997 1998 1999 QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: 0.22A 0.24A 0.24A - -E - -E - -E - -E 2nd: 0.26A 0.27E 0.18A - -E - -E - -E - -E 3rd: 0.24A 0.31E 0.24E - -E - -E - -E - -E 4th: 0.29A 0.35E 0.30E - -E - -E - -E - -E ------------------------------------------------------------------------------ Year:$ 1.01A $ 1.18E $ 0.97E $ 1.50E $ 1.20E $ - -E $ - -E Street Est.: $ 1.21E $ 1.20E $ 1.51E $ 1.49E $ - -E $ - -E ------------------------------------------------------------------------------ Price (As of 7/7) : $25.69 Revenue (1997) : 259.4 Mil. Return On Equity (97): 20% Proj. 5yr EPS Grth : 20% Shares Outstanding : 39.5 Mil Dividend Yield : N/A Mkt Capitalization : 1.0 Bil P/E 1997; 1998 : 26.4 X; 21.4 X Current Book Value : $4.75 Convertible : - - Debt-to-Capital : 12.3 % Disclosure(s) : C ------------------------------------------------------------------------------ * Adtran announces June quarter shortfall. * Revenues 11% below expectations, earnings 25% below expectations. Shortfall due to weak demand in ISDN and DDS (56 k/bit) combined with aggressive pricing. Adtran is the price aggressor. * June was all-time record bookings month (est. $23-$24 million). Carrier inventories appear lean. Total Reach just starting to ramp. A new HDSL/T1 customer announcement appears forthcoming. * Cutting 1997 and 1998 EPS estimates from $1.20 and $1.50 to $0.97 and $1.20, respectively. ------------------------------------------------------------------------------ Investment Opinion: While we have been disappointed with Adtran's inconsistent performance, we remain convinced about the growth prospects for high speed digital data services. Adtran's aggressive actions to drive down price and cost have taken a toll on near term performance but reinforce our opinion its proactive actions bode well for long term growth. With June bookings showing strong signs of recovery, Total Reach starting to ramp (and a new customer announcement expected soon), carrier inventories lean, the company moving into a higher margin fifth generation HDSL product, and a significant new HDSL/T1 customer announcement pending, we believe it is too late to be looking for reasons to sell the stock. We would be aggressive buyers below $20. Conference call 10;30 EST. Additional details to follow. ------------------------------------------------------------------------------ BUSINESS DESCRIPTION: Adtran is a leading manufacturer of high-speed digital transmission products used by telcos and end-users to facilitate advanced digital subscriber line services over existing telephone networks. ------------------------------------------------------------------------------ Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities.

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