Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Wednesday, August 30, 2006

ADC Telecom's High Fiber Diet

Stocks: (JDSU)(ADCT)(CIEN)(VZ)(T)

ADC announced disappointing earnings. Sales, at $344 million, were down slightly from the immediately previous quarter. At $11 million, net income was down from the same period a year ago.

The company lowered forecasts and, according to MarketWatch, blamed a fiber inventory glut at Verizon and slower-than-expected fiber roll-out at AT&T pending its merger with BellSouth.

ADC's stock has been hit hard this year. Shares are down by half from just below $28 for a 52-week high to $13.88 after hours yesterday.

As pointed our, ADC is something of a canary in the coal mine for large rivals Ciena and JDS Uniphase. JDSU reports earnings today. Its stock has been knocked down from $4.30 to $2.65 this year. At $4.26, Ciena's stock has done the best, at about double its 52-week low of $2.09. The company's last quarter was slightly better than expected, as was guidance.

The issue with the three companies does not appear to be if they will do well, but when. Fiber-to-the-home deployments are likely to benefit all three, but the timing of these projects by Verizon, and, especially AT&T are a moving tarket.

Merriman Curhan Ford is predicting a 30% increase in the optical fiber networking market over the next year, according to the Associated Press. So, ADC Telecom's relatively weak numbers are probably not a real set-back for the sector. But, the choppy surf is not going away.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

Powered by Blogger