Vladimir, my answers to your questions are as follows:
1. Yes, I believe ASND may miss earnings estimates, plus will show eroding margins and market share due to stiff competition from CSCO and COMS. Insider selling at 23 was very worrisome in my book. If you can pick up ASND in teens, it should be worth double or triple that later in 1998.
2. Yes, CS will recover. CS is about to introduce new switching products which should be well received. Just look at past revenues and earnings since 1994, and you'll see CS has been a very consistent and profitable performer. IMHO, the disappointment this quarter had to do with reasons that should all be resolved in 1-2 quarters, incl. inventories, product transitions, a movement away from being a direct sales company, and prior back-loading in recent quarters. Unlike other networkers, CS seems to be aware of earnings estimates and has tried to do everything possible to meet or exceed estimates. The DEC acquisition should boost earnings by FY1999 (next year) or FY2000 at the latest. IMHO, worst case scenario is a buyout at a higher price than yesterday's closing. As the cheapest of the big 4 networkers, CS will be the easiest to digest and quickest way for a big computer company to enter into the networking arena.
BTW, this is not to say that CS is the only networker that is attractive. COMS is a screaming buy below 30, BAY at 25 is excellent and ASND in teens should prove very rewarding. CSCO at 85-90 seems expensive although it has very good support at 69. Good luck. |
