ADC shares touch 18-year low on reduced outlook

Thu Oct 23, 2008 12:24pm EDT

Oct 23 (Reuters) - Shares of ADC Telecommunications Inc ADCT.O fell 11 percent to their lowest level in 18 years on Thursday, a day after the network equipment maker cut its full-year outlook due to weak economy and announced job cuts, prompting JP Morgan to downgraded the stock.

JP Morgan Securities, which cut its rating on the stock to "underweight" from "overweight," said it expects lower revenue to continuously pressure margins despite ADC's restructuring plan.

"We assume that at least some of the negative revision is related to a slowdown in spending at AT&T (T.N)," Jefferies & Co said in a research note. It cut its price target on the stock to $10 from $17.50.

Credit Suisse, which cut its target on the stock to $6 from $11, said ADC's lowered outlook validates its concerns regarding the prospect of a reduced capex by AT&T, Verizon (VZ.N) and other carriers in second-half of 2008 and calender 2009.

On Wednesday, the company also said it was exiting certain unprofitable businesses.

Jefferies said exiting these businesses will make ADC a leaner organization in the wake of the current macro environment.

According to UBS, the company may cut 300 jobs, or 3 percent of its workforce.

"ADC preannounced negative fourth-quarter results last night, for the second quarter in a row blaming lower connectivity sales just about everywhere in the world," said the brokerage, which cut its price target on the stock to $8 from $11.

Shares of the company, which makes broadband data access and infrastructure equipment, were trading down 48 cents at $4.71 Thursday midday on Nasdaq. Earlier, they touched a low of $4.60.

(Reporting by Purwa Naveen Raman in Bangalore; Editing by Amitha Rajan)

((purwa.naveen@reuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: purwa.naveen.reuters.com@reuters.net)) Keywords: ADC/RESEARCH

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