Hi Linda, I've held this one for a long time. My assumption was that in the world of telecom. equipment, ADCT would be one of the early "recovery" stocks because of the product line and where its used in the system.
Well, it's been a lot longer wait than I ever expected. Maybe that will make it all the sweeter when it does come.
We own shares of this in several different accounts.
Here's what Value Line has to say about it currently:
"ADC Telecommunications is making some progress to restore profitability. In the face of steep spending reductions by the telecom carriers (its primary customers), ADC is continuing to lower both fixed and operating costs. In July, the company again reduced its pro forma quarterly break-even revenue point to $180 million (from $190 million in the April period).
However, there is no indication that ADC's end market is recovering. The company may benefit from increases in telephone carrier spending, stimulated by the FCC's August ruling to deregulate broadband, as well as from Defense Department contracts to build a global optical network. But the level and pace of investments in these new areas, as well as their impact on ADC's top line, remain uncertain. In the meantime, the Broadband Infrastructure and Access group (about 60% of total revenue) shows declining numbers, both sequentially and compared with last year's tally. Software systems and systems integration services are showing some improvement. and sequential increases. And in March ADC announced a multi-year contract with Deutsche Telecom for the Singl.eView billing system. But the company's focus on sales to major accounts will likely result in longer sales cycles. ADC's third-quarter sales came in slightly below our expectations, and we are at this time lowering our fiscal 2003 total by $15 million, to $765 million.
The company's improved financial resources give it added flexibility. With the recent addition of $400 million of convertible debt, cash increased to nearly $750 million. ADC now has ample resources to sustain operations for several years, as well as the option to expand through selective acquisitions.
ADCT shares are ranked Average (3) for the year ahead, but have long-term appeal. The timing for ADC's upside, however, will in large part depend on the strength and speed of an economic recovery.
Terese S. Fabian October 3, 2003"
Further, they expect ADCT to be break-even by next quarter and to have slight earnings starting the quarter after that. They have a lot of "purchasing power" with all that cash right now. If they do decide to go on an acquisition safari, they have plenty of ammo.
Best regards, Tom
Port Washington, WI 53074
