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Technology Stocks : Ascend Communications (ASND)
ASND 219.63-2.1%Feb 4 3:59 PM EST
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To: Sector Investor who wrote (8612)8/12/1997 2:53:00 PM
From: Maverick   of 61433
 
Frame Relay business may be weak as indicated by ANET,a reseller of CSCC
By Motley Fool

When you can find a discrepancy
between two or more companies in similar or related businesses, many times this represents
an investing opportunity. A recent example of dissonance was the July 30th rally in shares of
ASCEND COMMUNICATIONS (Nasdaq: ASND) (N) (S) on the same day that ACT
NETWORKS (Nasdaq: ANET) (N) (S) was getting clobbered. Ascend had told investors
that sales of frame-relay equipment for its Cascade Communications subsidiary had picked up,
causing excitement among investors, while at the same moment frame-relay switch vendor
ACT Networks was plummeting due to a rather ugly looking quarterly earnings report.

The dissonance here was that one company was moving up largely due to positive comments
about its frame-relay prospects while another company in the same business was trading
down because its quarterly results confirmed what everyone already knew -- frame-relay
switch sales were weak over the past three months. Particularly given that ACT Networks is a
reseller of Cascade Communications frame-relay switches according to one report, it made
absolutely no sense that one company was up on prospects while another company was down.
Dissonance of this nature tends to be resolved in the future in one of two ways: either the
company that went up goes down or the company that went down goes up, assuming they
started from positions where they were reasonably valued given their future prospects.
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