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Published 9/9/97 6:42 PM ET.">
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<font size="3" face="Geneva, helvetica, arial" color="#000066">Somehow Ascend VP Bernie Schneider convinced investors to be patient. </font><br clear="all">
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<font size="4" face="Arial" color="#000066">Bull Run: Ascend Strong After Soothing Words at Solly Conference</font><p>
<font size="2" face="Arial" color="#000000">By <a href='mailto:kpetrie@thestreet.com'>Kevin Petrie</a><br>Staff Reporter</font><br>
<font size="1" face="Arial" color="#000000">9/9/97 6:42 PM ET</font><p>
<font size="2" face="Arial" color="#000000"><p>Old news is great news.
<p>So sang investors after a conservative but unsurprising speech from Ascend (<a href ="http://www.thestreet.com/profiles/street_comp_profiles.asp?ticker=ASND">ASND</a>:Nasdaq) execs at a Salomon Brothers analyst conference in New York on Tuesday afternoon. Ascend indicated that it still doesn't know if European business will meet expectations in the quarter ending Sept. 30, according to Patrick Adams, manager of the <a href="http://www.thestreet.com/MutualFundProfiles/funds.asp?ticker=BEONX">Berger 100</a> fund, whose analysts were in attendance.
<p>Adams' reading: No problem, we already know that.
<p>"The fear was that they were going to preannounce" disappointing profits and seal their fate, says Adams. Instead, Ascend reiterated cautious statements that investors had digested weeks ago. "It's already in the stock," Adams says, and finally the stock was ready to rise again.
<p>Shares of Ascend, which dipped in early trading, lifted in the afternoon to close up 2 7/16 at 42 9/16 on heavy volume. Cisco (<a href ="http://www.thestreet.com/profiles/street_comp_profiles.asp?ticker=CSCO">CSCO</a>:Nasdaq) didn't quite make up its mind, but ended the day a bit higher. Another piece of bullish news fanned 3Com (<a href ="http://www.thestreet.com/profiles/street_comp_profiles.asp?ticker=COMS">COMS</a>:Nasdaq), which added 3 7/16 to end at 51 5/8. That smidgen came from Intel (<a href ="http://www.thestreet.com/profiles/street_comp_profiles.asp?ticker=INTC">INTC</a>:Nasdaq). When the chip maker on Monday unveiled a new line of adapter cards at the same old price, investors perceived a respite from the 3Com-Intel price wars.
<p>As for Ascend, somehow its VP, Bernie Schneider, convinced investors to be patient during his speech Tuesday at the Salomon gathering. Berger's Adams, for one, finds the long-term outlook as robust as ever (short-term, he expects Ascend to earn 33 cents per share in the current quarter and to keep its margins intact). Berger 100 owns 550,000 shares of Ascend, up a bit recently, and Adams says he's watching like a hawk for the moment to buy a lot more.
<p>Ascend's investors have weathered a tough August, as Solly's analyst Peter Swartz aptly affirmed in a <a href=" archive.thestreet.com note</a> on Sept. 2. Citing sluggish business in Europe, Swartz trimmed his earnings estimates from 34 cents per share to 32 cents per share for the quarter ending Sept. 30. He is more conservative than the Street -- the First Call consensus has edged downward from 36 cents per share to 34 cents per share in the last month. Recovery, however, brightens the horizon.
<p>"For investors willing to look past Ascend's near-term execution issues, we see much more appreciation potential over the next 12 months than downside risk," wrote Swartz, who maintained his buy rating and set a price target of 55. He added that the Cascade unit, acquired on June 30, should re-energize sales late this year or early next year with new switching products. Salomon has performed no underwriting for Ascend or Cascade.
<p> Another pro who seems willing to wait is money manager John Leo at Northern Trust. "We're looking for signs of accelerating demand," says Leo, whose <a href="http://www.thestreet.com/MutualFundProfiles/funds.asp?ticker=NTCHX">Northern Technology</a> fund owns shares of Ascend, Cisco and 3Com. Leo has kept his portfolio weightings in those stocks largely unchanged in recent sessions. Still, he's looking for indications that phone carriers and other companies (especially those overseas) have picked up their spending on infrastructure. And while executives seldom enjoy disclosing it, Leo wants to know that profit margins are intact.
<p>If and when revenue stability returns, Ascend will run at a discount. The stock trades at 32 times earnings for the trailing four quarters, if significant acquisition charges are disregarded. Pretty cheap, given the 112% growth rate in that period. Shares run at 21 times projected 1998 earnings, while analysts predict growth of 38%.
<p>The recent malaise took hold of Ascend and other networkers rather abruptly. Execs made an upbeat appearance at a July 29 conference in Santa Clara, Calif. (<a href=" archive.thestreet.com; in TheStreet.com). Then the good news paused for a while. On Aug. 11 the company stated in a Securities and Exchange Commission filing that sales in July were proportionally low (also <a href=" thestreet.com; in TheStreet.com) -- not necessarily a negative sign in itself, but enough to feed the bears. General anxiety about the sector helped beat Ascend from a July 31 high of 54 3/8 to 41 3/8 on Aug. 28.
<p>Since that trough Ascend's stock has ebbed and flowed, closing down 7/16 at 40 3/16 on Monday. A Dow Jones report on Monday afternoon that WorldCom's (<a href ="http://www.thestreet.com/profiles/street_comp_profiles.asp?ticker=WCOM">WCOM</a>:Nasdaq) UUNet division will accelerate its purchases of Ascend's gear failed to nurse the stock.
<p>While Ascend's quarter won't wind down for a few weeks, some hard evidence of the sector's health will surface soon. 3Com expects to report earnings for the quarter ended Aug. 31 after the markets close on Sept. 23; Cabletron (<a href ="http://www.thestreet.com/profiles/street_comp_profiles.asp?ticker=CS">CS</a>:NYSE) is tentatively scheduled to release its numbers on the morning of Sept. 22.
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