Ascend net up 139 pct, Cascade sales growth slows
Reuters Story - April 10, 1997 21:15
FINANCIAL ELC US RES DPR RESF CORA ASND CSCC NNC CSCO V%REUTER P%RTR
ALAMEDA, Calif., April 10 (Reuter) - Ascend Communications
Inc on Thursday said first-quarter net income before
charges rose 139 percent from the same period a year earlier,
while its merger partner Cascade reported a sequential
drop in sales.
Ascend said net income for the three months to March 31
rose to $46.3 million, or 36 cents a share, compared with $19.4
million, or 15 cents, in the first quarter of 1996.
That was slightly more than Wall Street's consensus
estimate of 33 cents a share, according to First Call. With an
$18 million one-time charge for purchased research and
development tied to its acquisition of InterCon Systems Corp,
earnings were $35.1 million, or 27 cents a share, the company
said.
First-quarter net sales for the fast-growing maker of
remote networking products was $202.4 million, up 120 percent
from $92.0 million in the first quarter of 1996.
Westford, Mass.-based Cascade Communications Corp, which
issued a profit warning on March 30 and announced Ascend's
intention to acquire it in a stock swap, reported earnings in
line with its revised target.
For the quarter ended March 29, Cascade reported profit,
excluding a $213.1 million one-time charge, of $14.8 million,
or 15 cents a share, compared with net income of $10.4 million,
or 11 cents a share in the year-ago period.
Revenues for the first quarter rose 61 percent to $90.3
million from $56 million for the same period in 1996, but that
was down 18 percent from $110.3 million for the fourth quarter
in an industry where large double-digit sequential quarterly
gains are the norm.
"We do not believe that the quarter's revenue performance
is the result of any underlying fundamental business issues
specific to Cascade," Cascade President and CEO Daniel Smith
said in a statement accompanying the results.
Analysts said Cascade executives told them in a conference
call that some of the company's customers, especially U.S.
telephone companies, have increased the capacity utilization of
traffic on equipment similar to that sold by Cascade to as high
as 90 percent from around 40 percent historically.
As a consequence, demand decreased for Cascade's products,
which include frame relay and asynchronous transfer mode
switching products.
"Ascend clearly is delivering the numbers," said Volpe,
Welty & Co. analyst Amar Senan.
Analysts added they do not expect softness in Cascade's
sales to weigh further on shares of rivals such as Newbridge
Networks and Cisco Corp.'s StrataCom, which
they said are less heavily dependent on U.S. customers.
"Certainly this is a company in transition," one analyst
said, adding that its frame relay business, nevertheless, had a
book-to-bill greater than one, indicating more orders were
booked than product shipped during the quarter.
"I think the bad news was already built into the Cascade
stock price," he said. "Now I think Ascend is the one that is
going to determine what the price of the two companies is."
Ascend's acquisition was initially valued at $3.7 billion,
but the value has since slipped on a somber reception from Wall
Street, falling to less than $3 billion at one point. The deal
is expected to be completed during the summer, analysts said.
Shares of Ascend, which hit a 52-week peak of $78.75 in
January but have since slumped. It closed at $52 on March 27,
the last trading day before the Cascade acquisition deal was
unveiled. It has recovered some territory from a closing at
$40.75 on March 31, after the acquisition was announced. |
