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Message 3330 of
3343
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Expect
disappointment
danginsberg
(22/M/Washington,
DC)
Oct 8 1998
9:52AM EDT
Shareholders of TLAB have suffered through the worst of
times in the past few weeks due to the fallout of the CIENA
deal and the global slackening demand for telecommunications
equipment. Lucent's commments concerning faltering growth
certainly does not bode well for companies like Tellabs, Cisco
and Nortel in this shaky market.
There is some comfort, though in holding a quality company
like Tellabs. For one, at least 80% of all voice and data
transmissions are carried over Tellabs' equipment. The
company provides cross-connects to all of the Baby Bells and
several long-distance carriers and international carriers. As the
flow of data traffic continues to increase and bandwidth
continues to decrease, the local and long distance carriers have
no other alternative but to upgrade their existing networks.
Tellabs (as well as Lucent, Nortel and others) provides the
equipment necessary to facilitate the transition of voice circuits
to data packets. It is this evolution of data communication that
fuels the many years of growth ahead of Tellabs.
There are also some peripheral sources of reveune that may
support Tellabs' bottom line, including cable telephony
products. The At&T merger with TCI clearly displays the
coming convergence of cable and telephone. However, our
existing networks cannot support the transfer of phone-line
traffic over cable wires. Companies like Broadcom and
Tellabs have developed cable telephony modems and other
devices that facilitate this convergence.
In summary, the future is bright for Tellabs as well as its
competitors. And as the market continues to wear away at
your portfolio, remember the phone lines that you chat on, the
ISDN lines that you download the Internet on, and the cable
lines that you watch TV on. They are not going away--they are
only getting better.
Dan Ginsberg
Partner
Stock Advantage
DAVE DICKERSON |
