MFN..What do you think of this stock long? sjb
Symmetricom: The Broadband Butler
Analyst: David Peltier (09/01/00)
It might be fair to think of Symmetricom (NASDAQ: SYMM - news) as the Internet's butler. The company makes network synchronization systems that make sure that high-speed data transfers occur on the Internet on time and without errors.
Maybe it doesn't make sense to talk about butlers in an era when even the super-rich don't have employ them, but if a butler's job is to make sure your clothes are ready and your personal affairs are in order every day, you can think of Symmetricom the same way. Perhaps Cisco Systems (NASDAQ: CSCO - news) and JDS Uniphase (NASDAQ: JDSU - news) get all the glitz and glory in the Internet, but somebody has to do the unheralded little tasks that make sure the data zips and zaps around the World Wide Web cleanly. That's Symmetricom's job.
But even companies that do the unheralded tasks that others avoid get some attention these days. The stock is up roughly 130% year-to-date, and has rallied from a low of $9.04 on August 11 to $15.38 in just the past three weeks.
The technology is an integral part of old-line voice and data systems, as well as the emerging broadband communications networks that transmit a wide array of multimedia applications.
Symmetricom was a pioneer in the first global positioning system-based synchronization equipment made in 1985, and now also has technology that works with code division multiple access protocol. Samsung is the company's largest wireless customer in this growing segment.
One of the reasons for the stock's momentum, is that Symmetricom pre-announced it would beat June quarter estimates. In the June fiscal fourth quarter, the company grew revenue 81% year-over-year to $34 million.
For the full year Symmetricom posted record bookings and revenue of $107.6 million. Going forward the company has some decent visibility for its product demand, and it also ended fiscal 2000 with a record backlog.
One of the few weak spots is that the company's gross margin declined 5 percentage points from fiscal 1999 to 42.7%.
But most of the recent buzz around the company is because it is now moving into making products for the optical network infrastructure Symmetricom introduced its first product in this arena during the fourth quarter, dubbed GoLong.
The product is intended to extend the reach of asynchronous digital subscriber line (ADSL) networks, allowing more people high-speed Internet access. Chief executive Thomas Steipp said in the latest earnings release that Symmetricom is currently testing GoLong with potential customers, and plans to begin shipping the product by 2001.
Even with its recent run, the stock still trades at a reasonable 31.4 times its fiscal 2001 estimates of $0.49 per share, compared to earnings of $0.31 per share in the June 2000 fiscal year. Analyst Robert Montague of Morgan Keegan has the only published Wall Street estimate on the stock, and continues to rate the shares ``market perform''.
The company recently completed a 3-for-2 stock split, that management feels will help make the shares more liquid on the market. One effect of this could be that Symmetricom will look more attractive to institutions, which already hold about 37% of the shares outstanding.
Symmetricom also has a solid balance sheet, with $55.3 million in cash and equivalents ($3.50 per share). The company has less than $8 million in debt (5.7% of equity), which affords the company plenty of leverage should it be needed in the future.
Bottom Line:
Symmetricom has a solid network synchronization business, and its move to network infrastructure equipment should only serve to bring more interest to the stock. |
