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Netorkers Getting Boost from Santa Clara Conference
July 29, 1997
By Kevin Petrie
Staff Reporter
In the morning it looked bad for the networkers. But by midday it was all smiles again for the group -- the Californians had awakened.
Positive signals from an analyst conference in Santa Clara, Calif., helped reinvigorate a sector that stumbled badly on Monday. At the gathering, Networking Connections 1997, Ascend (ASND:Nasdaq) gave the bulls a fistful of ammunition. In a speech at 11:30 a.m. EDT, CEO Mory Ejabat reiterated that demand from Internet service providers in Europe for its MAX TNT and related products has been robust, according to money manager Patrick Adams at Berger Associates. Shares of Ascend felt a high-octane boost in afternoon trading, jetting up 5 3/4 to 52 1/2.
Just this month Ascend began shipping in volume its upgraded MAX TNT products, which function with 56kbs modem technology from Rockwell (ROK:NYSE). Last quarter, a backlog of orders had mounted while Ascend grappled with production delays. This quarter that pent-up demand is converting to profits.
Other networkers felt a boost from Ascend's warm words as well, including Cisco (CSCO:Nasdaq) and 3Com (COMS:Nasdaq). Executives from 3Com are scheduled to speak Tuesday evening, while a presentation from Bay Networks (BAY:NYSE) is slated for Wednesday evening.
Wall Street's general good cheer even washed over beleaguered Boca Research (BOCI:Nasdaq), a modem maker whose profits have run aground while 3Com and Ascend battle for 56k modem ascendancy. 3Com's U.S. Robotics unit is promoting an alternative standard to Rockwell's chipsets.
Tuesday morning Boca reported a net loss of $2.6 million, or 29 cents per share, compared with profits of $2.8 million, or 31 cents per share, one year earlier. The company stanched its flow of red ink on a sequential basis, but still came in a nickel shy of First Call estimates.
And it fell short of the 25-cent loss predicted by analyst Hank Powell at Southeast Research Partners, who indicates that he is likely to trim his estimates for this quarter as a result. Nonetheless, Powell anticipates a rebound in the fourth quarter as Boca helps feed
Ascend's hungry ISP clientele. On July 23 Boca teamed with the mammoth vendor to market their products and promote Rockwell's technology.
Powell also points out that Boca's efforts to broaden its portfolio could plant the company on more solid ground. In April Boca started shipping Data Secure!, a software product, and this year the company has teamed with other companies to develop technology jointly. Powell rates Boca a hold; his Florida-based firm has performed no underwriting for Boca Research.
Make no excuses -- Boca's report is dismal. But that created little fallout for the sector or even its own stock. By midmorning, in fact, Boca was trading in positive territory on roughly average volume. Berger's Adams explains how Ascend and 3Com can excel where Boca slips.
"In the modem business, you need scale. You need to be big. It's just like PCs -- you have to drive costs down with big efficiencies," says Adams, who manages the Berger 100 fund (BEONX). "The third-tier person is always going to have problems."
Adams says his fund has been buying Ascend stock lately. He owns more Ascend than 3Com or Cisco, because he believes it will grow more rapidly over the long term. According to Technimetrics, the fund owned 829,000 shares on March 31. |
