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Technology Stocks : ADC Telecommunications

ADCT 4.350

+8.1%

1:34 PM EST

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To: Nevin S. who wrote (386)	3/7/1998 7:30:00 PM
From: Johnny Canuck	Read Replies (4) of 1944

Since there was no conference call re-play available I decided to call Investor Relations to get some clarification on the earnings report. Here are the questions and the answers. Mark Borman is the newly appointed Vice President of Investor relations. He seemed quite open to answering questions if you have a specific issue that needs clarification. He said that he will be working on getting a conference call re-play in place for the coming quarterly reports. A number of people have requested the same thing. Question: In the January 16 press release the earnings short fall for the quarter was attributed to instability in Asia, a slow down in carrier spending and product mix. Was there one dominant factor for the short fall? Answer: The main reason for the short fall was slow down in carrier spending due to the recent round of consolidation in the industry such as WCOM ,Brookes Fibre and MCI and ATT and Teleport. As a result of the mergers, the capital budgets of a number of their customers were frozen while the companies worked to get rid of redundancies and get their cost structures under control. New budgets have been drawn up for the current year and they are seeing their customers beginning to spend again. They are seeing purchase orders from those customers again. No product mix problems of significance. In terms of Asia they saw some orders of filters that are used in wireless phones cancelled due to the decreased demand in the region. They supply to Motorola, Nokia and Ericsson. They do not supply to Qualicomm. Question: In the CIEN conference call, it was suggested by the company that WCOM may have built out as much capacity as they will require for the curent fiscal year. Are you seeing the same thing? Answer: No, CIEN is in a different product segment. ADCT has a just in time purchasing relationship with WCOM. Most orders are shipped within a week. ADCT is seeing orders from WCOM. [In CIEN's case, WCOM was buying up to 2 years of anticipated capacity in advance. They are now only purchasing and deploying as needed.] Question: What is the geographic breakdown of sales? Answer: 80 percent in the U.S., 20 percent international with about 10 percent in Europe, 4 percent in Asia and 6 percent in Latin America. Question: Much of the growth the last few years has come as a result of acquisitions. Will ADCT continue to aggressively grow that way? Answer: ADCT will make acquisitions to acquire the right technology and/or distribution channels as the opportunities present themselves. They will not make acquisition in order to just grow the company's revenues. They expect growth to continue to come from a combination of acquisitions and internal growth. Question: What is the forward guidance for EPS growth? Answer: We are comfortable with the 20 percent annualized growth rate that has been quoted in the press. [He seemed a little cautious about the next quarter though. He wanted to stress that this was an annualized growth rate. The business tends to be loaded towards the 4 th quarter.]

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