ADC Feels Fiber Shortfall

ADC Telecom (ADCT) shares tumbled after the company warned late Tuesday that fiscal fourth-quarter numbers will be lower than expected.

The Minneapolis telecom gearmaker blamed weak preliminary results on a drop in demand for fiber optic equipment in the quarter ending Oct. 31. ADC supplies telcos like Verizon ( VZ) and SBC ( SBC) with hardware for fiber optic network upgrades designed to offer advanced digital services like video.

The company now expects to post earnings of about 17 cents a share on $295 million in sales. Prior guidance called for a 26-cent profit on $320 million in revenue for the fiscal fourth quarter.

ADC shares tumbled $3.67, or 15%, to $19 in early trading Wednesday.

To adjust to slumping demand for fiber gear and amplifiers for wireless networks, ADC says it will fire 400 workers in its manufacturing plant in Mexico.

Though the company took down its fourth-quarter numbers and expects fiscal first-quarter numbers to slide below the prior-period levels, executives kept 2006 guidance unchanged.

"ADC believes that it can again grow sales in fiscal 2006 at rates faster than aggregate global communications equipment sales for this sector," says CEO Bob Switz in a press release.

Some analysts pinned the shortfall on a slowdown in orders from Verizon for its fiber-to-the-home effort.

"We believe the inventory buildup may be due to Verizon aggressively spending on FTTX equipment in the fiscal second and third quarters," UBS analyst Nikos Theodosopoulos says in a research note Wednesday.

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