Here is the summary of the report posted by Warburg Dillon Read on 3 Jan 99.
WSTL: ADSL LIKELY TO OUTPERFORM NEAR-TERM, BUT CHALLENGES REMAIN
Summary:ÿ
This note talks about why near-term business looks good for Westell, partially due to ADSL CPEs doing extremely well in Bell
Atlantic and British Telecom. This visibility goes well into 2000 as the ADSL revolution lifts seemingly all boats. However,
another message of this note is that Westell faces a nontrivial strategic challenge in terms of positioning. The ADSL CPE market is
shifting from carrier (RBOC) driven "push" deployment to PC driven "pull" deployment by 2001, and in that market players such as
PC-Tel, we believe, will have a cost advantage. Westell must pick the right spots in the market, where either higher prices or very
high volumes can be achieved, in order for profitability to be had in our view. ÿ
Go here to see the whole thing...
westell.com
This goes back to the original argument against WSTL...The market it's in, while it is hot, will also turn extremely competitive. Sort of what the old U.S. Robotics went through when everyone and their grand ma started selling modems.
During the TLTN merger conference call they also mentioned that one of the reasons for the TLTN merger was to help out with DSL...I took that to mean they expect serious competition and they needed TLTN's cash flow to stay competitive in the CPE area.
I also don't agree with WDR's "PULL" Theory. At least not yet. Maybe in 2 to 4 years, But until DSL's infrastructure gets built out better and the standardization is at the level of todays 56k modems, I think the "push" idea will be around and benefiting WSTL. After all why would Computer makers push DSL enabled systems, that at the current time, most people would not need or may not be able to use. The pull theory also leaves out all of us that already have systems.
This report also mentions they don't see any upside surprise for the CPI unit.
They do expect the CPI spin off before 2001,that could be interesting. Unless, the IPO market dies out and the markets continue to turn bearish...(Just my luck, WSTL will present great earning in a bear market and go no where) |
