To all:
SUMMARY OF KEY POINTS OF 10/6/97 TELLAB'S ANALYST TELECONFERENCE WITH COMPANY'S MGT.TEAM
3rd ¬ for Tellabs was a good one. Sales were $309 million +32% over 3rd ¬ 1996. Titan sales up +41%, Martis sales +28% (up really +53% in Finnish money as there was $12 million lost in currency swap)
Martis DXX coming on strong with 110 customers so far. +53% actual growth, so 4 ¬ sales will be $78-84 million, which is all that Tellabs can handle at this time. Ireland plant getting done in June,1988 will help supply situation.
1/3 of business is international. Gross profit margin was 62.6% (+3.1%). R and D at $40 million or 12.9% of sales, was right on target. S.A.P.-global information system is great. Net profit after tax=$64.3 million +39% over last year or 21% of gross revenue. Net EPS=$.34/share vs $.25/share, up 36%. Cash and investments=$500 million ( up$76 million over June ¬). Capital improvements=$ 25 million for ¬ (3 major expansions). Book value=$4.84/share vs .$4.33/share last ¬ +11.8% in just 3 months." Rest of 1997-looks good", mgt. team feels comfortable with analyst's projections of $.40/share net earnings for 4th ¬.
In last 4-6 weeks,Tellabs stock was more volatile than normal,fueled partly by what mgt. thought was a carefully worded pronouncement (quit expecting Tellabs to substancially beat analyst's calls all the time ) was misinterrupted. Analyst's "unfounded worries" have caused stock volatility. Digital cross systems (Titan) do very well vs. optical fiber networks, and will be strong for the foreseeable future. 1988 will be a strong year for Titan systems. Titan systems are in the 4th or 5th innings of the ball game of usefulness and Co. continues to add upgrades,functions which extends ball game into overtime. Added 800 people in last 12 months. Cablespan, phone channels on hybrid fibers,products are starting to grow in Europe ,growth in States in future. Cablespan produced $4 million in 3rd ¬,will produce $8 million in 4th ¬ and projects to be $ 50 million sales in 1998. ATM backbone systems with virtual path cross-connects being studied-Tellabs is doing a lot in this area. Majority of 18 analysts that partcipated in questions in conference call with companies top 3 mgt. team said Congrats on solid 3rd 1/4,upgrades to follow IMHO. What came across, was a progressive,technologically based mgt. team leading Tellabs strongly in a multiitude of complex areas of growth. Release 5 upgrade with optical ring management will be included in all new systems, with 8 customers in various stages of current acceptance. Steinbrecher wireless local loop technology should provide $20-25 million in sales in 1998 in latin america, Asia yet to come? World Comm. merger with MCI is encouraging news for Tellabs. World Comm.'s goal is a seamless global network with added financing and means added real opportunities for Tellabs products. Net profit margins may go down a bit in future, but increased volume will make up for it. Mergers of various carriers has not had a negative impact on Tellabs. What they are saying is that with $600 Billion to be spent on info. Superhighway Infrastructure by the year 2000, globally it doesn't matter what the various combos of cos. is,Cos. with excellent products like Tellabs will get more than their fair share of business.(editor's comment)
WDM (dense wave) can bring a lot of capacity to the fore which can be managed,filtered,groomed.brokedown into usable segments by Titan type digital cross- connect type products,so it's an real opportunity for Tellabs,which is forming teams to work in WDM arena. Dr. Paul Green's team is not up to critical mass yet, is bringing forth new developments in dense wave business.
Echo cancellors represent $100 million/year of business and are part of voice transmission area , and is not as growthy an area as other parts of business.
Titan products sales are 1/2new systems and 1/2 upgrades. Goal is to find new markets for them in central offices, large carriers. New feature package 5 is a nice upgrade.
Internet protocols are coming on, but don't count Tellabs out of this area.
$200 million in stock and $300 million in cash, means that Tellab's is on the prowl for major acquisitions, they are doing their homework now ,with announcements sometime in the future.
Summary by DAVE DICKERSON |
