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Technology Stocks : Ciena (CIEN) -- Ignore unavailable to you. Want to Upgrade?

To: vvargesmd who wrote (9378)	7/20/2000 3:27:52 PM
From: jghutchison	Read Replies (1) \| Respond to of 12623

Tellabs et al July 19, 2000 14:10 Tellabs: Growth at a Reasonable Price? As second-quarter earnings reports continue to flood in, today's includes one from network equipment maker Tellabs (Nasdaq: TLAB) , which posted strong growth in revenue and earnings. Tellabs' industry is white-hot right now, and its numbers reflected that: revenues were up 47.9% from the year-earlier period, to $800.7 million, and earnings jumped 33.2% to $162.7 million. Earnings per share (EPS) were a couple of cents ahead of analysts' estimates, at $0.39, an increase of 34.5% above the comparable period last year. Investors who still think only of companies such as Cisco (Nasdaq: CSCO) , Nortel Networks (NYSE: NT) and Lucent (NYSE: LU) when they hear phrases like "network equipment manufacturers" should get up to speed on smaller companies like Tellabs and others in its industry, including ADC Telecommunications (Nasdaq: ADCT) , Ciena (Nasdaq: CIEN) , and Alcatel (NYSE: ALA) . While most investors are familiar with the larger companies -- which are practically household names these days -- these lesser-knowns are just as likely to be where the action is in the next couple of years. Their products are in heavy demand and they are growing quickly, without the huge market caps and near triple-digit P/Es of their larger counterparts. Three-year EPS growth of 64.5% Tellabs, for example, has achieved three-year compound sales growth of 38.7% and EPS growth of 64.5% over the same period. The company makes optical networking and broadband access products, including its flagship Titan series digital cross-connect systems, of which it has sold over 10,000 units. One of its fastest-growing products is CABLESPAN, which helps cable operators such as AT&T deliver voice, video, and data over cable lines. CABLESPAN has narrower profit margins, however, than the company's Titan products, which is one reason Tellabs has seen gross margins decline from last year. Another reason is component shortages, and the two factors caused the company to miss earnings estimates last quarter. While the company acknowledged in this morning's conference call that shortages will persist throughout the year, they maintain they can manage around them. The changes in product mix and component shortages caused gross margins to fall from the 58-59% range last year to 51.8% in the first quarter, but they recovered this past quarter to 53.7%. Certainly, the first quarter's disappointments indicate some risk surrounding the company, but the parts shortages also reflect the fact that Tellabs can't sell its products fast enough -- literally. This is not a bad thing. A reasonable price tag at 34x estimates for 2001? Along with the company's growth comes a relatively reasonable price tag, at least compared to some of the larger equipment makers. Of course, this is just a quick estimate, and is not intended as any kind of endorsement, but Tellabs is currently trading at about 34x forward estimates for 2001, which is not bad given the company's long-term estimated growth rate of about 30%. Some other companies in this sector also sport similar valuations, such as ADC Telecommunications and Alcatel. Investors should take a look. Your Turn: Join the conversation about Tellabs on our discussion boards. Related Links: Tellabs Warns, Investors Shrug, Fool Plate Special, 4/6/00 Tellabs Takes a Tumble, News, 1/25/00 TELLABS, INC - TLAB Price 65 1/2 Net Change -2 11/16 Volume (000) 6324 Day High 70 1/4 Day Low 65 1/4 CISCO SYSTEMS - CSCO Price 69 7/16 Net Change +2 5/8 Volume (000) 35803 Day High 69 11/16 Day Low 67 3/16 NORTEL NETWORKS CORP - NT Price 78 3/8 Net Change +1 7/8 Volume (000) 7920 Day High 79 11/16 Day Low 77 1/2 as of 07/20/00 15:25 PM EDT