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

To: bananawind who wrote (2558)	6/8/1998 9:36:00 PM
From: Dave Dickerson	Read Replies (1) \| Respond to of 7342

To all 6/9/98 Here is my take on the Tellab's-Ciena merger. I first had to get some good trout fishing in,got 24 trout. This was a joining of two best in breed cos. Michael Birck was in total command of Ciena's teleconference on 6/5/98.Spending on optical eqt. is up 16% per year or twice that of telecom eqt. Ciena was the fastest startup in history ,tripling in value since going public.They make devices that allow phone cos. to multiply capacity.They make filters that separate light into it's many colors(using fiber bragg gratings) and circuits that brighten many colors at once ( with erbium doped fiber amplifiers) This whole business is called wave division multiplexing or WDM. Instead of having one wave of light carrying messages in a optic fiber,Ciena's products allow it's client's to carry up to 96 messages at once. This increased efficiency allows cos. to attack their biggest expense, namely the cost of operation. Paul Green and his team of light wave communications ex- IBM experts,now working for Tellabs will be merged with Ciena's 1300 workers in this field. Best estimate is that Tellab's moved ahead in WDM ,at least 2 years by this buy. The demand for carrying capacity is growing so fast that only fiber optics can fill the need. Ciena has a major marketing agreement with Cisco,with Cisco linking it's WDM future with Ciena,now Tellab's. Ciena's gross revenues are growing 64% per year,and Tellabs are growing by32%per year. Yes we paid a 14 % premium for Ciena, but in 4 years that will look like a heck of a bargain. Ciena's current customers include Sprint,AT+T,Japan,China etc.and this will be very additive to Tellab's efforts. Later this year Ciena's new product will increase fiber capacity by 96 times,or one fiber will have the ability to carry of over 3,000,000 voice calls at a time I talked to a fiber optic cable laying co.lately, they had laid 400 miles so far this year and each cable had 48 optic fibers in them. Both cos. feel there will be 50 million in pre-tax synergies gains in '99.In '98 the cost of putting the deal together will be 60 mill. or $.17 per share. No job losses will occur.1300 top notch workers are gained, the R + D will be combined and customers will be benefited. The currant topo mgt team at Tellab's will be kept very busy. All 10 analyst's who posed questions at the telecon. said they liked this marriage. Lehman said this was a major strategic positive move, and they felt 1999 EPS estimate was $2.30 times a 35 PE gives you a $80-$85 target price for that year Ciena's ¬ ending 5/2/98, the gross was 42 mil. up 46% from '97 Remember internet traffic is doubling every 100 days. Growth of data transmission is 4 times greater than voice transfers.Spending for optical fiber eqt. was « billion in '96,and expected to be 4 bil. by 2000 and 10 bil.not too long after. Guru Gilder says that in 10 years an all optical network will be thousands of times more cost effective than electronics networks. One guy felt in '99 TLAB net to be $2.25/share and Ciena's to be $1.71 net per share for an average of $2.05 per share(2/3 tlab1/3 Ciena's).times 40 PE give you a $80 price in '99 or at $45 PE a price of $90 in '99.In '97 Ciena's net was $14mil. and in '98 was 112mil. ,up 8 times. At the teleconference the old goal of 2 billion gross. by 2000 for Tellab's was thrown out ,with the new goal laid down of being one of the top 3 telecom.eqt. cos. by 2003.'97 sales were 1.1bil. and by year 2003 a gross of $6-8 billion was the goal.(this goal was laid down to sales force last fall by Brian Jackman) The bd. of directors will go from 8 plus 4 from Ciena to 12 total.The international mkt place will be expanded. Both cos. have kindred spirits. This should help to speed up new products to mkt. and speed up WDM products. Tellab's was really impressed with the stuff they saw in Ciena's back room.There will be a combining of new and different approaches to problems. THIS WILL BRING BETTER PRODUCTS,QUICKER,TO A BROADER ARRAY OF CUSTOMERS, GLOBALLY. My summary is there will be some slow down in Tellab's stock price growth in '98.,but a new explosion of long term growth starting in '99.A REAL GOOD MOVE. DAVE DICKERSON