Claub B.-and others. .In the October,1997 issue of Smart Money Magazine appeared
the article "Smart money: Ten Stocks For The Year 2000 and Beyond:-invest in the
technology of tomorrow, today". The full article can be seen at
smartmoney.com
One of the 10 choices was a telecommunications stock and I quote the article as
follows-
"TELECOMMUNICATIONS
History never repeats itself precisely, so we're going out
on a limb to predict that telecommunications, which has
not figured prominently in the most successful sectors so
far, will yield one or more top performers over the next
several years. Given surging demand for
telecommunications products, we don't know why the
sector hasn't performed better, though we suspect the
continuing, sometimes rocky transition from a heavily
regulated to a free-market environment has something to
do with it. Even conservative estimates call for 12
percent annual growth. As every telecom analyst likes to
point out, half the people in the world have yet to dial a
telephone. And in the developed world, the use of
telephone lines and switching equipment for faxes,
computers and the Internet is surging. (Ponder the fact
that so many telephone numbers are now in use that 87
new area codes have had to be created in North
America in the last two and a half years.)
SmartMoney: Ten Stocks For The Year 2000 And -7-
Two companies did make our list of the best performers
of this decade so far -- Analog Devices and 3Com --
though they are more often classified as technology than
as communications companies. Both were popular with
analysts back in 1990, both had a strong market
position and 3Com had very strong annual growth in
sales. We looked for similar qualities in today's market
to arrive at our recommendation: Tellabs Inc.
Tellabs, based in Lisle, Ill., makes telecommunications
equipment that allows analog and digital signals to run
smoothly, enabling users to transmit voice, data and
video over existing copper wires and newer fiber-optic
lines. It dominates this growing market, ranking well
ahead of its nearest rivals, among them Lucent
Technologies. The company has recently introduced an
integrated interface to Sonet rings -- a technology that
can, among other things, reroute traffic if there is trouble
on a line and increase reliability. With research and
development spending now at $100 million per year,
Tellabs is spewing out successful new products for local
and long-distance phone companies, as well as for
wireless and cable companies. Tellabs' sales have grown
at a spectacular annual rate of 36 percent over the past
five years, while capital spending has more than tripled.
Gross profit margins are an enviable 61 percent. The
stock, trading recently at 36 times earnings, isn't cheap,
but with these growth prospects, it seems a relative
bargain."
DAVE DICKERSON |
