Article: Cabletron lifted by upgrade
Analyst positive on second-quarter earnings
By Cecily Fraser, CBS MarketWatch
Last Update: 4:45 PM ET Sep 17, 1999 Silicon Stocks
Hardware Report
ROCHESTER, N.H. (CBS.MW) -- Shares of Cabletron Systems jumped 8 percent Friday after SunTrust Equitable Securities upgraded the stock to "strong buy" from "buy" amid growing optimism that the data networking company will report solid second-quarter earnings.
Analyst William Becklean raised his second-quarter earnings estimate to 6 cents a share from 4 cents. That matches the consensus estimate of analyst surveyed by First Call.
Rochester, N.H.-based Cabletron (CS: news, msgs), which makes routers, switches, and other hardware devices, is slated to report earnings Monday. Its rival, 3Com (COMS: news, msgs) will take to the earnings stage Tuesday.
The stock advanced 1 1/2 to 19 1/2, and traded as high as 19 7/8 to continue on an upward path that began in August amid takeover speculation. Becklean said he doesn't believe the company will be sold in the near term.
In fact, Cabletron is still in the process of adjusting to some changes in management. Its chief executive officer, Piyush Patel has been with the company since June. See press release.
"Under a new management team, the company is emerging this quarter from a two-year turnaround," Becklean said in a note to clients.
Becklean, who raised his 12-month price target to $24 from $18, said that the company's core product line, the SmartSwitch Router, is well positioned to continue showing growth.
"We see no need to wait for the second-quarter results or the conference call to become more aggressive on the stock," the analyst said.
Chris Stix, an analyst at SG Cowen said he's looking for growth in the company's layer 3 switch business.
In a research note, Stix said he expects Cabletron revenue to hit $350 million, and believes that the layer 3 switch business will generate better than 27 percent quarter over quarter growth vs. 22 percent in his model.
In the year-ago period, Cabletron earned $14.6 million, or 9 cents a share on revenue of $370.6 million. |
