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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (50075)	7/15/1998 1:32:00 PM
From: djane	Read Replies (2) \| Respond to of 61433

thestreet.com. Tellabs on Track for Strong Thursday Earnings Report [ASND reference] thestreet.com By Kevin Petrie Staff Reporter 7/15/98 12:40 PM ET Is Tellabs (TLAB:Nasdaq) reporting earnings or throwing a party? Shareholders have few doubts about the second-quarter earnings, scheduled for release before trading begins Thursday. If three money managers owning loads of the stock know anything -- and they think they do -- Tellabs sits in fine fettle as it prepares to button up two mergers later this year. "I just know that the number's going to be good," says Jeff Diecidue, managing director with Unicom Capital, a money management firm. After checking with sources, Diecidue is estimating that Tellabs will beat the First Call consensus estimate of 42 cents per share by one or two pennies. It posted 32 cents one year ago. Diecidue's firm owns Tellabs and is adding to its stake in Ciena (CIEN:Nasdaq), which Tellabs is acquiring in a one-for-one stock swap. The deal, expected to close in September, now is valued at $8.1 billion. Diecidue is particularly pleased that share prices of the betrothed companies have converged nicely. Together, he says, the combined company will stand second only to giant Cisco (CSCO:Nasdaq) in the food chain of networkers, the companies that build the innards of the Internet. Tellabs traded 1 3/8 higher at 76 3/4 early Wednesday, while Ciena was up 1 1/4 at 75 3/8. Tellabs already has climbed more than 40% this year. With a market capitalization of $13.7 billion, Tellabs trades at 52 times trailing earnings and 11 times trailing sales. Ciena is valued at $7.5 billion, or 62 times earnings and 15 times sales. The lofty valuations don't scare Diecidue, who figures the combined company is worth 80 per share, or 35 times the earnings he expects in 1999. Doug MacKay, an assistant portfolio manager at Oak Associates, a Tellabs shareholder that is purchasing Ciena these days, hopes to learn in the conference call just when the two companies will close their merger. Regulators have to approve the deal; in early June, Tellabs said it hoped to finish in 75 to 90 days. Also, he intends to take the temperature of the spending by phone carriers. Tuesday evening, Ascend (ASND:Nasdaq) said it expects strong carrier business in the rest of 1998; MacKay wants to confirm that Tellabs sees the same trend for its products. Portfolio manager Bill Grierson with Tellabs shareholder Kopp Investment Advisors also expects the company to extend its series of upside surprises. The company has topped estimates at least seven quarters in a row, according to the Baseline data service. Investors might have to wait longer for clues about the progress of the Tellabs-Ciena combination. They like the technological fit, but also want to learn about the companies' plans to develop new products jointly. Tellabs is snapping up Ciena partly to ensure its flagship product in the U.S., the Titan 5500, isn't pushed to the margin as network technology evolves. The Titan is a digital cross-connect device that sends electronic signals down different paths. The rise of fiber-optic network equipment -- devices which transmit signals in photons (light) rather than electrons -- has prompted Tellabs to stock its arsenal. Acquiring Ciena is a big step in that direction. "One of the only remaining knocks for Tellabs was: Where do they go after Titan?" Grierson says. "And I think this answers the question." Ciena builds products that phone carriers use to increase network bandwidth by pushing 16, 40 or more light messages through one optical fiber. However, its products cannot handle multiple paths; so far, that can only be done electronically. The next step is to build an optical cross-connect device that can send light messages down different paths without converting them back to electrons. This is the product of the future. While Tellabs and Ciena haven't announced any such product, they are widely expected to cook one up in a year or two. Competitors such as the startup Tellium are trying to beat them to the punch. Tellabs also disclosed plans in February to acquire Coherent Communications (CCSC:Nasdaq) for stock now worth $871 million. Coherent bolsters Tellabs' technology lineup with products that remove echoes from signals on both wireless and wire networks. Tellabs still is waiting for approval from the Department of Justice on the deal. See Also TOP STORIES Ciena Soars at Close on Takeover Rumors 6/2/98 5 PM TOP STORIES Will Cisco Enter the Acquisition Derby? 6/22/98 10 AM TOP STORIES ARCHIVE Tellabs Company Quotes Ciena Company Quotes Cisco Company Quotes c 1998 TheStreet.com, All Rights Reserved. TOP \| ABOUT US \| CONTENTS \| SUBSCRIBE \| ADVERTISE \| TRADE ONLINE \| FEEDBACK \| SEARCH \| HELP