From Kaufman Bros Research (01/09/01)
EFFICIENT NETWORKS, INC. (EFNT $9 13/16)
RATING: ACCUMULATE
PRICE TARGET: $20
NETOPIA, INC. (NTPA $3 27/32)
RATING: ACCUMULATE
PRICE TARGET: $14
VERIZON AND COVAD RING IN THE NEW YEAR WITH STRONG SUBSCRIBER
ADDS
Yesterday, both Verizon Communications (VZ $54 1/4) and Covad Communications (COVD $1 5/8) pre-announced operating results that represented strong growth in DSL subscriber additions. While newer players continue to be plagued by tight supplies of capital, we believe that established players with larger balance sheets will continue to aggressively roll out high-speed data services. We have not seen any evidence of a slowdown in demand and see 2001 as being a significant year in subscriber installs.
VERIZON COMMUNICATIONS
For the quarter ended December 31, 2000, Verizon announced it had roughly 540,000 DSL subscribers, representing sequential growth of 190,000 subscribers during the quarter, or about 15k subscriber additions per week. Weekly installations were up some 50% from the 10,000 additions per week in the prior quarter. In addition, the company presented a bullish outlook for its Data
and DSL business at an investor conference.
COVAD COMMUNICATIONS
Exiting the December quarter, Covad had 274,000 lines in service, up some 69,000 from 205,000 at the end of last quarter. Of the lines installed during the quarter, some 17k were provisioned over a shared line, up significantly from 400 during the previous period. Also of importance, 92,000 lines of the total are not generating any revenue for Covad as the company considers them delinquent accounts and is conservatively unwilling to assume it will eventually be paid for services provided. While the number of ISPs on probation seems to be growing every quarter, the company continues to install thousands of new lines every quarter. Guidance, however, calls for an average of 45,000 line additions per quarter for 2001, a significant drop from current levels. We believe this guidance is deliberately conservative considering the current state of the company’s ISP partners. |
