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

To: Immi who wrote (1904)	1/26/1998 2:06:00 PM
From: craig crawford	Respond to of 7342

TELECOM EQUIPMENT STOCKS. This sector continues to be dragged lower by fears that U.S. telecommunications services companies are slowing capital spending. Additional evidence of this trend was issued after the close on Friday, when ADC Telecom (ADCT 18 15/16 -10 3/16) warned Wall Street that it expected 1st qtr earnings to fall below Wall Street's revised consensus estimate of $0.24 a share-- the company's second earnings warning in as many weeks. In just ten days, this issue has lost almost 50% of its value as concerns over weak seasonal spending by regional bell operating companies (RBOCs) have surfaced. After the first warning, Wall Street analysts were reluctant to make any moves. In fact, the only ratings change made was a Deutsche Morgan Grenfell upgrade from "accumulate" to "buy." Well, today, Deutsche Morgan, as well as Bear Stearns, Merrill Lynch, BA Robertson Stephens are fleeing from the stock with downgrades (see Short Stories for details). What's more, the cautionary outlook issued by ADCT is causing analysts and investors to take a step back from other sector stocks, including Northern Telecom (NT 40 5/8 -1 11/16) and Tellabs (TLAB 47 7/8 -3 1/2), which were both downgraded from near-term "accumulate" from "neutral" by Merrill Lynch. Merrill analyst Joe Bellace believes that consolidation in the telecom services industry could lead to a near-term slowdown in capital spending. In a recent survey of 142 service providers, he found that on average they planned to increase spending by just 3% in 1998.

To: Immi who wrote (1904)	1/26/1998 2:10:00 PM
From: Clam Clam	Respond to of 7342

ML (Joe Bellace) on TLAB: "We are concerned that consolidation in the telecom services industry could result in a near-term slowdown in capital spending..." "Major customers for the TITAN 5500 include Bell Atlantic, Worldcom, GTE and SBC Communications. Bellsouth and MCI are also TITAN customers. This customer base exposes Tellabs to the consolidation and capital spending reduction risks." Hey Joe, did you just figure that out? Since internet traffic began to build (circa 1994), TLAB has not traded at a forward P/E multiple below 23-24x (Jan, 1996). 23x current '98 estimates of $1.75 would = $40 1/4. With a solid earnings outlook, this stock is hardly a sell at $45, despite risk to the low $40's - potentially.