TO ALL --Apparently no one saw this research report put out by
Goldman Sachs at 8:32 a.m.. Probably the comment that could have spooked some people was the following:
<<There is significant risk that PairGain will not meet previous estimates this quarter, we believe, as the tone of business for HiGain, its key product, appears to remain weak in June following a relatively weak May. Actual results will depend on demand in the later part of June which is still unknown given the limited visibility in this market.>>
NewsWare Timestamp: 06/23 08:32
(FIRST CALL) GSCO: PairGain Technologies : Lowering 97 and 98 estimates;
GSCO: PairGain Technologies : Lowering 97 and 98 estimates; MO.
GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS GS
Goldman, Sachs & Co. Investment Research
PairGain Technologies
* * Lowering 97 and 98 estimates; MO. * *
Abraham Bleiberg (212) 902-0179 - NY Equity Research
===================== NOTE 8:24 AM June 23, 1997 ======================
Stk Latest 52 Week Mkt Cap YTD Pr Cur
Rtg Close Range (mm $) Change Yield
--- ------ ------- ------- ------ -----
PairGain Technologies MO 18.00 44-14 1152.8 -41% 0.0%
--------------Earnings Per Share---------------
PAIR Mar Jun Sep Dec FY CY
1998
-Abs P/E on- -Rel P/E on-- P/NxtFY LT EPS
Cur Nxt Cur Nxt EBITDA Growth
----- ----- ----- ----- -------- ------
PAIR FY 24.7X 18.0X 1.3X 1.0X NA X NA%
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* We are lowering PairGain 1997 and 1998 EPS estimates by a nickel to
reflect significant short and medium term downward pressures on the
company's revenues and earnings. Our 1997 EPS estimate is now $0.73 and
the quarterly progression is $0.19, $0.17, $0.18, and $0.19 versus our
previous $0.19, $0.19, $0.20, and $0.21. Our 1998 estimate is now
$1.00.
* There is significant risk that PairGain will not meet previous estimates
this quarter, we believe, as the tone of business for HiGain, its key
product, appears to remain weak in June following a relatively weak May.
Actual results will depend on demand in the later part of June which is
still unknown given the limited visibility in this market.
* Furthermore, it now appears possible that the pricing pressure being
exerted on this product (which we have discussed in the past) will start
affecting revenues and earnings as early as next quarter as customers
start demanding the lower prices now being negotiated in open contracts.
* We are lowering our estimates to reflect these two negative trends.
However, we recognize that there is still significant uncertainty on
results over the next six months.
* We believe that the fundamentals of PairGain's business remain intact.
There is a strong likelihood that growth will return to this business as
demand for existing products returns, as pricing competition stabilizes,
and as new products such as PG-Flex and PG-Plus gain acceptance in the
marketplace. However, investors should be prepared for a difficult six
month period while these positive trends become apparent. Continue to
rate stock a market outperformer.
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