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Technology Stocks : TLAB info? -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (5847)	7/8/1999 2:06:00 PM
From: Don Edgerton	Read Replies (3) \| Respond to of 7342

Anyone have any details on the AG Edwards downgrade?

To: Ian@SI who wrote (5847)	7/8/1999 2:58:00 PM
From: Beltropolis Boy	Respond to of 7342

fwiw, here are excerpts from levy's (lehman bros) take on the acquisition. ----- Tellabs, Inc: NetCore Acquisition Is a Net Positive Author: Steven D. Levy (212)526-2499 / Sender Cohen x3777 / Andrea Green x3860 Rating: 1 Company: TLAB Today's Date : 07/01/99 Disclosure(s): C Highlights: * Tellabs announced yesterday that it is acquiring NetCore Systems for about $575 million. * We believe this is a strategic step for Tellabs, providing it with an IP router/ATM switch as well as the engineering know how behind the technologies used in NetCore's Everest Integrated Switch. * Although this acquisition is expected to be a penny or two dilutive this year and neutral to accretive next year, we are leaving our EPS estimates unchanged at $1.29 for 1999 and $1.65 for 2000 as we believe Tellab's base business should more than offset any dilutive impact of this acquisition. * Tellabs remains our number one investment idea and we would take advantage of yesterday's price pullback as a buying opportunity. Summary: Tellabs announced yesterday that they are acquiring NetCore Systems for a set price of approximately $575 million in an all-stock deal. We believe this is a strategic step for Tellabs, providing it with an IP router/ATM switch as well as the engineering know-how behind the technologies used in NetCore's Everest Integrated Switch. The announcement of this acquisition also confirms our opinion that Tellabs is not likely to make any large acquisitions too soon. We are leaving our earnings estimates unchanged at $1.29 for 1999 and $1.65 for 2000. Although this acquisition is expected to be $0.01 - $0.02 dilutive this year and neutral to slightly accretive next year, we believe Tellabs' base business should more than offset any dilutive impact of this acquisition. In fact, Peter Guglielmi - CFO, suggested that analysts need not change their estimates, confirming our opinion. We note that for the just ended June quarter, we are forecasting revenues of $526 million and EPS of $0.30 and believe that strength from the TITAN product line should offset some weakness in the Martis DXX area due to currency translation. The company is planning to report June quarter results after the close on Monday, July 19. This acquisition is expected to be an insignificant pooling and to close during the third quarter. NetCore's Everest switch is currently in trials with a few customers, mainly IXCs and ISPS. We find it reassuring that management believes they could recognize about $10 million in revenues this year from 3-4 customers with sales ramping up to approximately $50 million next year and about 10 customers. Although these amounts are immaterial to Tellab's total revenues, we are forecasting 2000 revenues of $2.9 billion, revenue recognition is a very positive step in the growth of this product line. And with the Tellab's sales force behind the NetCore product, sales could grow at a much faster pace. We believe the margins on the NetCore product are in line with Tellab's corporate average gross margins of 58%-59%. The NetCore Everest product falls into the same category as products by Avici, Juniper Networks and Nexabit Networks. Relative to the purchase price of $900 million that Lucent is paying for Nexabit and Juniper's $6.3 billion market capitalization, this $575 million acquisition price seems quite reasonable, especially given that the NetCore product is carrier class, fully NEBS compliant, and already in field trials. The technology and expertise that comes with this acquisition should be synergistic with Tellab's existing product lines, although it could take some time to integrate the different technologies. For example, we believe the IP technology could be integrated into the TITAN digital cross connect products, the AN2100 gateway, and the CableSpan HFC systems but integration is likely to take at least a year and probably longer. NetCore Systems was founded in October 1996 by Ashraf Dahod, Kwabena Akufo, Steven Dunstan and Kenneth Virgile. This group has already successfully founded and sold 2 networking companies, Sigma Network Systems which was acquired by Cabletron and Applitek Corporation which was acquired by Nortel/Bay Networks. We believe the cultural fit between NetCore and Tellabs is quite good. Tellabs remains our number one investment idea and we would take advantage of yesterday's price pullback as a buying opportunity. ----- Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities.