Jefferies cuts Westell, Efficient
By Lisa Sanders, CBS.MarketWatch.com
Last Update: 1:09 PM ET Aug 3, 2000 NewsWatch
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NEW YORK (CBS.MW) - Shares of Westell Technologies plunged 18 percent and Efficient Networks' value lost 5 percent after Jefferies & Co. on Thursday downgraded the providers of equipment for high-speed Internet access to "hold" from "buy."
On a tough day for tech stocks in general, Westell (WSTL: news, msgs) lost 3 1/4 to 15 3/16 on heavy volume of 4.8 million. Efficient dropped 2 11/16 to 52 3/8 as 1 million shares changed hands.
In his rationale, Jefferies analyst Joseph Bellace said that recent weakness in the customer premises equipment (modems, routers) segment of the digital subscriber line industry reflects issues related to SBC Communications (SBC: news, msgs) and Verizon.
Dallas-based Efficient is the market share leader in the CPE DSL space and SBC is its biggest customer. Covad (COVD: news, msgs) is the second-largest customer of Efficient.
Efficient (EFNT: news, msgs) and Westell make equipment that supports broadband transmission over copper telephone lines.
Bellace noted that beginning June 1, DSL provisioning was transferred to SBC subsidiary Advanced Services from SBC itself. The move was made because of regulatory issues related to SBC's acquisition of Ameritech.
Jefferies believes that SBC's run-rate of DSL installations peaked at 4,000 a day in May, dipped below 4,000 a day during June and July and returned to 4,000 a day in early August.
"Looking forward, we expect the cost of provisioning DSL service at SBC will be significantly reduced because 50 percent of new DSL lines will be self-installed by Dec. 2000 compared to the 10 to 15 percent today," Bellace wrote. "Our analysis indicates that there may be more-than-normal levels of inventory in the channel."
Efficient CFO Jill Manning told CBS.MarketWatch.com that the company has seen no slowdown in its business from SBC.
"And we don't anticipate any slowdown in our business. SBC is experiencing tremendous demand," Manning said. "If for some reason it slowed down, we have plenty of other customers lined up for our products."
On another front, Bellace wrote that CPE modem shipments could be adversely affected in the September quarter due to a potential strike at Verizon.
"We believe that Westell is the primary supplier and Efficient is the secondary supplier to this customer," Bellace wrote.
Manning said that Verizon is not a large customer of Efficient's products.
"We are working with them and would like to have a lot more of their business, but we really don't sell a whole lot of product to Verizon," Manning said. A strike "would have no impact on our business."
Bellace said that Westell's management has been cautious in regard to the CPE unit of its business in the September quarter.
Chicago-based Westell could not immediately be reached for comment. |
