However hot the telecom space was in the late 1990s, it’s actually hotter now. The difference is that now, while you might read about it or invest in it, you also live it.
Think of BlackBerrys, iPhones, or even your text-messaging, Web-browsing, video-recording cell. These aren’t telephones, they’re communication devices, and they wolf down bandwidth like a teenaged boy Pac-Mans his snack food. While the devices themselves are wireless, the networks they rely on to transmit and receive also use fiber and physical connections. So, along with hugely popular high-bandwidth Internet sites like iTunes and YouTube, these personal communication devices have been consuming the gigamiles of “dark fiber”—unused fiber optic cable—that was left in the ground when the tech bubble popped eight years ago.
And that’s good news for the company that was arguably the biggest Minnesota rider of the tech wave. In 2000, Eden Prairie–based ADC was a Fortune 500 company with annual revenues of more than $3 billion. Two years later, it was about a sixth that size. Its stock (Nasdaq: ADCT) had screamed from the $50s down to $4. The downsizing was horrendous.
These days, ADC’s stylish Golden Triangle building—something of a ghost town after the bubble burst—looks less empty. Annual revenues are back above the $1 billion mark; this year, ADC predicts revenues a little below $1.5 billion. (Final numbers for fiscal 2008, which ended October 31, are due in early December.) Robert Switz, the company’s CFO beginning in 1994, and its CEO and president since 2003 (and more recently, also its chairman), says ADC has gone “from a turnaround to a growth story pretty rapidly.”
Continued growth will be a challenge in this volatile economy. Thanks to industry consolidation, ADC doesn’t have many domestic phone-company customers; and although more of the company’s business is coming from outside the U.S., neither the domestic nor global market is expected to grow. In late October, the company forecast a loss for fiscal 2008, also announcing that it planned to shed 3 percent of its work force as well as some underperforming businesses and products. Severance packages and write-downs account for much of the loss. ADC’s stock price has fallen this year from $15 to $6.35 at the market’s close on October 30.
But Switz also says that the company continues to bring in positive operating income and cash flows; the balance sheet still looks solid. In any case, the company is undeniably in a far better position than when the bubble burst, and that wasn’t luck. ADC saw the future—and adapted to it.
