NMSS here are the comments, so hard to do this in real time
<<Natural MicroSystems Corporation (NMSS - 17 1/16) October 15, 1999
Edward R. Jackson, CFA, 612-342-5545, ejackson@pjc.com
Great Results For 3Q99; Top And Bottom Lines Ahead Of Expectations;
Restored Growth Trend; Much Improved Financial Results Anticipated In 2000;
Raising Rating To Strong Buy From Buy; Raising Estimates, And Price Target
To $30
Highlights:
--3Q99 Ahead Of Expectations-Restored Growth Trend. On October 14, before
the open, Natural reported results for 3Q99 that exceeded expectations. For
the quarter, Natural reported revenues of $20.3 million versus our estimate
of $19.3 million. 2Q99 revenues were $17.6 million. On this quarter's sales
volume, the Company reported a net loss per share of $0.19, which was $0.04
ahead of our $0.23 net loss per share estimate. Consensus had a loss of
$0.24 per share.
--Key Positives: Successful strategic market repositioning, monthly
linearity in 3Q99, services business on track , greatly improved
visibility, DSOs down 16 days, cash increased $2 million, and significantly
improved confidence from management.
--Key Catalysts. 1) New product announcements; 2) strategic accounts focus;
3) continued momentum in services business; 4) business in Asia returning
to levels not seen since the third quarter of 1997; 5) channel partners
relationship; and 6) strategic relationships with industry leaders,
including ActiveVoice, Ericsson, Lucent Technologies, and Sun Microsystems.
--Raising Estimates. We are raising our projections based on increased
visibility, linearity, greatly improved business from Asia, a solid list of
contributing customers, and 199819/99 design wins attributable to 30% of
revenues. Recent design wins are anticipated to contribute early in FY00.
For FY99, we are raising revenue and EPS estimates $75.7 million and
($0.96) to $77.8 million and ($0.89), respectively. For FY00, we are
raising our estimates from $103.9 million and ($0.23) to $111.8 million and
$0.01, respectively.
--Raising Rating To Strong Buy And Target To $30. Continuing on a strong
three quarters of recovery and improved business fundamentals, we are
raising our rating from Buy to Strong Buy and our price target to $30. We
believe in the following reasons: 1) fundamental business metrics are
turning positive; 2) strategic accounts have products on market that are
continuing to ramp; and 3) the Company is squarely positioned to exploit
markets demands for intelligent network and enterprise solutions with high
value, innovative solutions.>>
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