A Corporate Communications Corp. Publication ---- All Rights Reserved
Special Opportunity Report
September 16, 2003
ADC Telecommunications (NASD) ADCT $ 2.65
52-week range $1.04-$3.21
Market Cap $2.14B
Shares Outstanding 804.13M
Book Value $0.83
Price/Book 3.15
Average Daily Vol. 15.5M
Target Price $5.50
Target Percentage 107%
ADC Telecommunications 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 $373 million.
  • 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 formed alliance.
Our target price for ADC Telecommunications stock is $5.50 per share.



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