Hi Doug, I see that my TLAB cheerleading over on the Qualcomm site has deviously had it's intended effect and lured you over here! I'll throw in a few comments with these additional suggestions. There are folks on this thread who are much longer term TLAB'ers than moi and I would particularly suggest you go back through prior posts by Dave Dickerson. He is, in the most complimentary sense, a raving fan and works very hard to keep this thread filled with TLAB info. That said,here's why I like this stock:
1. It's the margins, stupid <g>. TLAB's profit margins are fat (technical term) and they have remained fat for many years. Their Martis and Titan products are 'must haves' for the telecoms, and, once installed are VERY hard for a competitor to dislodge. In a Microsoft kind of way, a TLAB customer faces an upgrade to next level (which TLAB is only too happy to oblige) or shift to another vendor type decision--and the upgrade wins and has been winning for many, many years.
2. The margins obviously come from a top flight management team, headed by Michael Birck. All senior management positions are filled by long term veterans of the business; turnover is incredibly low. I have listened to the past three conference calls and these guys have candor and confidence that obviously bespeak a team that has been together for years. They are low key but tough--not egotistical manicacs. Personally, I just like their style.
3. The telcos need, must have, absolutely demand, fail safe equipment. Very few pass the "ultimate test": TLAB is ISO certified from soup to nuts (Dave, I need to know more about this and the quality rating recently bestowed on TLAB which only a fraction of companies possess--could you comment please?) Of course, Lucent is formidable competition but TLAB has been successfully meeting that challenge for years. There are precious few who do--is it a monopoly? Absolutely not, competition is certainly present. But there are only a relative hand full of suppliers at this level.
4. Like Qualcomm, TLAB spends huge bucks on R&D. They recently purchased the whole IBM photonics team. These guys are working on and clearly have a big leg up on the all optical network which will be the telecommunications blockbuster of the future. It is not yet ready for prime time but it's not too far away--information processed as pulses of light eliminating central hub intelligence requirements. I do not think it is an exaggeration to say that TLAB is in the business of putting its core business out of business--but the core is supporting, and will support for many years with abundant cash flows, the transition to what George Gilder calls "the dumb and dark network"--dumb because processing will take place at the periphery rather than the core: the network is merely a passive vehicle. This is as radical, or, dare I say it, more radical than the transition from TDMA to CDMA that the mighty Qualcomm has so brilliantly pioneered.
5. Last thought: if you want to invest in the telecom industry, the core holdings, IMO, are QCOM, TLAB, LU, and LOR (not necessarily in that order). TLAB has always bothered me with its high PSR (actually it has 'scared' me with its high PSR)but I have broken my rule cause I think they are THAT good. Think I'm bullish? Seriously, would love comments on Mike's TLAB high PSR phobia. Hope this raving leaves you something worthwhile to chew on Dave. Mike Doyle |
