| Turnstone Systems (TSTN) 12 3/8 -17 1/8: Investors in Turnstone Systems were hoping things couldn't get any worse. At the close of Friday's session, TSTN's stock had fallen 72% from its 52-wk high of 107 reached in July. As of now, however, you can make that 88%. This morning, the DSL equipment provider said it would be lowering its revenue estimate for the December quarter due to increased weakness among its competitive local exchange carrier (CLEC) customers and recent changes to their capital spending plans. For investors in the telecommunications space, this type of warning has become all too familiar. The added problem for TSTN, though, is that today's warning comes roughly 3 weeks after the company provided sales guidance on its Q3 conference call. Now, it is well-known that things change in a hurry in the tech sector, but few people would have expected things to change as quickly as they have for TSTN. Since October 17, TSTN said it has experienced major changes in customer demand, noting that weakness in the CLEC sector has intensified. As a result, it is lowering its Q4 revenue guidance to approximately $38 mln. On its Q3 conference call, TSTN said that Q4 sales would be sequentially flat with Q3 sales of $56.2 mln. Aside from that realization, though, TSTN added fuel to the stock's fire with its revelations that DSLAM vendors were cutting back on financing activities to certain data CLEC customers and that concerns about reduced capital spending have broadened to international markets. In Q3, international revenues accounted for 19% of TSTN's total revenues. In Q2, they were just 5% of total revenues. By and large, the fallout from today's sales warning has been limited primarily to TSTN as its own growth prospects are being called into question. Lucent (LU 25 1/2 +1 3/16) and Nokia (NOK 43 5/16 -5/8), which represented 17% and 10% of TSTN's total revenues in Q3, are certainly holding their own as are the likes of Rhythms NetConnections (RTHM 2 1/2 unch), Covad Comms. (COVD 6 5/16 +11/32), and Copper Mountain (CMTN 11 13/16 -5/8) which, suffice it to say, have also suffered badly amid the slowdown in the DSL business-- a slowdown that has been confirmed yet again by the TSTN warning.-- Patrick J. O'Hare, Briefing.com |
