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

To: Boplicity who wrote (4223)	10/23/1998 12:33:00 AM
From: Boplicity	Read Replies (1) \| Respond to of 7342

From the fool thread: Nice summary for those just starting to look at TLAB (M/Washington, DC) Oct 16 1998 9:03AM EDTThe telecom-service industry is currently upgrading its various networks so that the local-distance, long-distance, wireless and cable operators can handle the convergence of voice traffic to data traffic (and vice versa) and the increasing capacity of overall telecom traffic (called “bandwidth”). Several telecom-equipment providers, including Tellabs, Cisco, Lucent and DSC Communications are providing the service providers with the tools they need to configure their networks for the transition from voice to data. As telecom-service providers use an increasing amount of bandwidth, they will start to exceed the capacity of their electrical networks, presenting strong demand for higher capacity, fiber-optic lines. Cisco, Lucent, Nortel and some smaller players helped long-distance operators (including Sprint and MCI Worldcom) build tremendous amounts of bandwidth through long fiber-length along railways and other interstate passages across the U.S. As data traffic uses increasingly more capacity on the inter-exchange carriers' high capacity networks, the RBOCs will have tremendous difficulty transferring the data onto their electrical networks. Therefore, the incumbent local-exchange carriers need higher fiber-optic capacity in their networks to expedite the increased communications flows from the long-distance carriers. Tellabs has a strategic position to provide the RBOCs and other telecom-service providers with convergence and capacity-boosting transmission equipment at the core of the data market. The company stands to benefit disproportionately from the growth of the data market, because of its pure-play in 3-1 cross-connect and optical bandwidth products and its existing relationships with all five of the RBOCs and most of the IXCs. The company is already the leader in digital cross-connect systems with 70% to 80% of the market, as up to 80% of the data bits crossing lines today are going over Tellabs' equipment. These cross-connect products are the main source of Tellabs' success, considering they accounted for approximately 60%, 57% and 49% of 1997, 1996, and 1995 sales, respectively. Further, as the company tailored its cross-connects to the specifications of the complex networks of its vast base of customers, it expanded its net profit margins from 6.5% in 1992 to 21.9% in 1997. The company expects sales and margins to continue growing because its customers will need to upgrade their cross-connect software systems in order to handle the rapidly changing communications environment. Of course, the company does have other products for the restructuring telecom industry. For instance, a big piece of the business is its international bandwidth management device. This product is mainly used for voice, data and wireless networks found throughout the world outside of North America. Also, Tellabs makes echo-cancellation equipment that enhances the voice quality of wire and wireless systems. Its recent acquisition of an international echo-cancellation player, Coherent Communications (CSCC) provides Tellabs with cost-savings, international focus and future product-development opportunities. Tellabs also plays a part in the development of cable modem and cable telephony technology, and stands to profit from any advancement in those areas. The risks: The biggest risk is whether customer demand will continue to be there for data services. If the telecom service providers do not see growth in their business, there will be no demand for the equipment. Another risk is will Tellabs be able to produce its own bandwidth product now that its attempted acquisition of Ciena has failed? It is imperative for Tellabs to integrate its cross-connect products with bandwidth-enhancement products in order to stay ahead of its competitors. Please visit Stock Advantage for comprehensive equities analysis. thestockadvantage.com Dan Ginsberg Partner