Corporate Communications Corp. Publication ----
All Rights Reserved
September 16, 2003
is a major supplier of network equipment and software
to the communications industry worldwide. The company’s
major customers include the regional telephone companies,
cable TV and the wireless and broadcast industries.
We are attracted to ADC Telecommunications
for the following reasons:
The sharp slowdown in capital expenditures
in the communications sector over the past two
years, appears to have finally troughed. There
have been recent signs of increased capital
spending by the communications industry to upgrade
its systems as well as broaden its penetration.
During the spending slowdown, ADC
Telecommunication responded by significantly
lowering its operating expenses. As a result,
the company was able to show higher gross profit
margins and continued positive cash flow.
As testimony to the management, the company
paid down its long-term debt this year while
the overall business environment was lackluster.
At the present time ADC Telecommunication
has a very small ($3 million) amount of debt,
while the company has a cash position of about
Recently, ADC Telecommunications
entered into an alliance with Sumitono Electric
and Preformed Line to provide fiber optic services
to the home. This is extremely important since
this is the one missing link to achieve full
broadband services to consumers. To date, connecting
the consumer has been very expensive and this
alliance will reduce the cost significantly.
Currently, ADC Telecommunications
is selling at $2.65 per share, which
we consider to be undervalued, considering the
up swing in capital spending and the recently
Our target price for ADC Telecommunications
stock is $5.50 per share.