Monday, January 29, 2007

Calls of Note Part 2

JP Morgan is raising their Q1 estimates on ADC Telecommunications (NASDAQ:ADCT) to reflect a more normal 12% q/q decline in revs vs. prior estimate for a 15% decline as they believe Verizon and Deutsche Telekom may have returned to spending on their respective FTTx networks faster than the firm previously anticipated after pausing in 2H'06. They reiterate Neutral rating as they continue to believe order patterns remain inconsistent making visibility a challenge, while ADC's desire to increase exposure to Asian markets through acquisition could increase execution risk.

Verizon may have worked through its FTTx inventory faster than the firm expected fueled by strong sub growth as Tellabs reported ONT revenue grew q/q in its Q4 ending Dec. 31, despite reducing ONT prices by 25% (or more) starting at the beginning of Nov. VZ reports today at 8:30am.

Deutsche Telekom reaffirmed its commitment to its 50-city VDSL rollout in a press release on Sunday and the firm believes spending on the FTTN VDSL rollout may have returned in late December as evidenced by Corning reporting on its Q4 conference call that orders from European customers were stronger than expected at the end of its quarter.

JPM continues to believe ADC needs add'l strong customers beyond DT and VZ and view Bharti and Chunghwa's FTTx plans as modestly positive although its is too early to tell if ADC can secure some of their business.

Notablecalls: Expect to see some buy interest in ADCT following the call.

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