[an error occurred while processing this directive]

The following article is provided by the Internet Financial Connection.  To receive the Internet Financial Newsletter via e-mail on a weekly basis, e-mail:  ifc-request@mLists.net with the word "subscribe" in the body of the message.  The Internet Financial Connection newsletter is edited by Mark Johnson.  Visit the Internet Financial Connection on Silicon Investor at:  http://www.techstocks.com/


Ingrid Hendershot of Hendershot Investments provides the following stock idea. An annual subscription is $45 for 4 issues. You may contact them by phone at (703)-361-6130.   Tollgrade Communications (TLGD 21 3/8) is a recent selection from her newsletter.   Below is her write up.

"Tollgrade Communications designs, engineers, markets and supports test access and test extension products for the international telecommunications industry.   Tollgrade's proprietary products enable telephone companies to use their existing line test systems to remotely diagnose problems in "plain old telephone service (POTS)" lines containing both copper and fiber optics. Most POTS line test systems were designed for use over copper wireline only, so the introduction of fiber-optic technology into the local loop renders it inaccessible to these test systems.   Tollgrade's metallic channel unit (MCU) products solve this problem by extending test systems access through the fiber-optic portion of the local loop.

Impressive Growth Record

Back in the old Ma Bell days, only "toll grade" quality telecommunications equipment
was suitable for the toll network. When Tollgrade began operations in 1988, the founders chose the name "Tollgrade" for the company because their objective was to provide only the highest quality equipment to the Local Exchange Carriers. Today, the emphasis on quality is even more important as intense competition among telecom providers requires continuity and high quality service to retain customers.

Tollgrade's testability solutions enable regional and local carriers to operate more efficiently
and cost effectively even as networks grow more complex. Remote testing reduces the
time needed to identify and resolve problems and often eliminates the costs of dispatching a
technician to the problem site.

Over the years, Tollgrade products have earned a solid reputation in the telecommunications industry. TLGD has received ISO 9001 registration. Their patented metallic channel unit (MCU)
technology has successfully undergone the extensive scrutiny and approval process of the
Regional Bell Operating Companies (RBOC's).

This has led to Tollgrade's strong growth.  Over the last five years, sales have grown at
an impressive 46% compound annual rate. Net income has zipped along even faster at a
100% annual rate as profit margins have more than tripled.

Tollgrade's strong growth continued in the first quarter of 1998 with sales increasing 25%
and net income advancing 20%. Tollgrade continues to invest heavily in its sales force
and the research and development of new products. Management is comfortable that
Tollgrade will post 20% sales and earnings growth for all of 1998, continuing a pattern
the company has set since it went public in 1995.

International Growth

Tollgrade recently entered the international arena. First quarter sales included modest
shipments of product destined for international markets. Earlier this year, TLGD announced
an agreement with Nortel and also reached a product development agreement with UT
Starcom, which will take Tollgrade's MCU technology into China.

Earlier this year, TLGD announced an agreement with Nortel and also reached a product development agreement with UT Starcom, which will take Tollgrade's MCU technology into China.

The Chinese market represents a huge opportunity for Tollgrade. Projections call for China to install 20 million phone lines per year for the next 20 years. Tollgrade also has a working relationship with a French test system vendor and is building products with a French
company.

Strong Financial Position

The small Pennsylvania company maintains an extremely strong financial position. Since
1995, the company has had no long-term debt. With more than $18 million in cash and
a current ratio of 8 to 1, the company has ample liquidity for acquisitions and other
corporate requirements. Tollgrade has also been buying back shares under its authorized
stock repurchase program.

In the U.S., overall line growth is growing at a much faster rate than it has ever before
because of the Internet. Phone companies are putting in second and third lines in many
homes as families sign up for Internet access.  Given Tollgrade's impressive growth record
and strong financial position, this company's innovative and cost-effective solutions may be
just the ticket for investors seeking to ring up gains in the growing telecom industry. Keep in
mind that 87% of TLGD's sales come from five RBOC's. With revenues so highly concentrated, Tollgrade will be sensitive to RBOC risk. Insiders own 19% of this small
company - a big plus."

© Copyright 1998, BizFN.com. All rights reserved.  The opinions expressed in the above article are those of the Internet Financial Connection. BizFN.com in no way guarantees the accuracy of any information found in the above article.  This material is for personal use only.  Republication and redistribution, including posting to news groups, is expressly prohibited without the prior written consent of BizFN.com.   The content provided within the BizFN.com web site is provided for informational purposes only, and should not be construed as investment advice.  At no such time should information contained on BizFN.com  be considered an offer to buy or sell securities.