Merrill Boosts AFC

Merrill Lynch & Co. Inc. raised its ratings for Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI) today on expectations that the company's digital loop carrier sales will get some help.

Analyst Simon Leopold writes that the company will probably see some short-term help from Verizon's remote terminal DSL efforts and a long-term boost from the big fiber-to-the-premises (FTTP) request for proposal (RFP) that Verizon Communications Inc. (NYSE: VZ), BellSouth Corp. (NYSE: BLS), and SBC Communications Inc. (NYSE: SBC) are working on now (see Vendors Await FTTP Shortlist).

Merrill took AFC's 2003 revenue estimate from $333.5 million (39 cents a share) to $340 million (42 cents a share).

That's good news for AFC and for the DLC market in general. Indeed, were it not for the promise of a big push in the FTTP (fiber to the premises) market, there are plenty of reasons to think that the DLC market is in for a bumpy ride in the next few quarters, given that carriers have cut capital spending and the fact that the market seems overcrowded (see DLC Shakeout Looms).

Investors cheered the news, and AFC's stock continued the steady climb it began around July 1. AFC shares closed up $1.19 (5.3%) to $23.30 in trading on Wednesday. The stock traded at $16.18 on July 1 and didn’t trade above $20 during all of 2002.

In the near term, Leopold and company say, Verizon appears to have shifted its spending focus from central office DSLAMs to DSL gear in remote terminals. Verizon has gear from AFC, Lucent, and Alcatel in its RTs. "We think that Verizon could show up as a 10 percent customer for AFC in 3Q03 and/or 4Q03," he writes. Merrill Lynch estimates that Verizon will have 650,000 total net DSL customer additions this year; to hit that mark the carrier must add 194,000 customers during each of the next two quarters. That would be a jump of about 50 percent compared to the first half of this year. If that doesn't require some equipment adds somewhere, what will?

For AFC's future, Merrill Lynch estimates that the RBOCs in the FTTP RFP will spend about $300 million to $400 million during the first year of deployments with the vendors it picks. This puts AFC in a nice position, as it is an incumbent access equipment provider.

— Phil Harvey, Senior Editor, Light Reading

rbkoontz 12/4/2012 | 11:30:31 PM
re: Merrill Boosts AFC If anyone is still following the sham that Zhone is putting on Tellium shareholders - I noticed an real world example of a more reasonable deal structure that I would expect between 2 struggling start-ups - one with cash. Given the remaining IPO cash back to shareholders and let the start-ups be start-ups.

SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 27, 2003--Netro Corporation (Nasdaq: NTRO - News) today announced that its stockholders approved its proposed merger with SR Telecom Inc. (TSX:SRX - News), clearing the way for the closing of the merger, scheduled to take place on September 4, 2003. The closing remains contingent upon other customary closing conditions and the formal declaration by Netro's board of directors of an aggregate $100 million dividend. Netro's board of directors has approved the declaration of the dividend, provided that there are no material adverse changes to Netro or SR Telecom between August 27, 2003 and the closing date. Netro expects that on September 4, 2003 all of the closing conditions will be satisfied, the merger will become effective and the dividend will be declared and paid. Only stockholders of record as of the close of business on September 4, 2003 will be entitled to receive the merger consideration of SR Telecom common stock and the dividend.
mtd 12/4/2012 | 11:30:26 PM
re: Merrill Boosts AFC
"For AFC's future, Merrill Lynch estimates that the RBOCs in the FTTP RFP will spend about $300 million to $400 million during the first year of deployments with the vendors it picks. "

Though AFC has built reputation in the access business, there is no guarantee that they are going to gain anything if RBOCs start deploying the FTTP, nor is there any sign that the RBOCs are going to deploy FTTP in the next year or so? It remains to be seen.

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