Ascend Communications (ASND) Message Board

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Technology Stocks : Ascend Communications (ASND)

ASND 220.58

+5.0%

Dec 12 3:59 PM EST

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To: Scott who wrote (12299)	9/13/1997 8:10:00 PM
From: Bobo	of 61433

Scott, It sounds that you and I are as long as one another so I wanted to share some thoughts I have cultivated over the weekend. Like I said before, I believe I follow Ascend as closely as most analysts and have been long since '94. I talk to the company regularly and talk to as many isp's as possible: - This may be temporary lull in Ascend's business but I believe the stock may not snap back quickly. As hard as Ascend is pushing to make the qtr, they may end up with AR DSO's in the range of 75 to 80. I have learned the hard way -- Cascade and Premisys -- that this really does rob from future qtrs since the company has drained all backlog as well as some future backlog. - Ascend has never faced such competitive pricing pressures nor has their mgt team (as much as I respect them) had to navigate through this kind of softness. It is quite easy for them to be too optimistic. As far as pricing goes, I would not be surprised to see per port pricing head from $400 to $200 given that Bay is close to this and Ascend has set some bad precedence with their isp special. Even if port growth doubles, revenue stays the same in this equation. - The strong US $ is going hurt all of these guys in overseas sales. Even is products are sold in dollars, they are going to cost overseas customers more. - I would not be surprised to see UUnet start to use Cisco as a secondary vendor once cisco rolls out its next gen ASXXX device. I remember that they were close to using Cascade's product before the merger. A large company like that cannot afford to not pit vendors against one another. - There may indeed be some overcapicity in dial-in ports that needs to get absorbed before we see major speding by the isp's. Many have spent heavily this year to get capacity. Think about the fact that BBN will likely lose some ATT and AOL business, PSI has lost alot of Mindspring's business. - I have heard from some major backbone providers that cisco has indeed found new religion in the isp business. This company can do alot when they get focus. I am long cisco as well. Having said all this, I am still long Ascend and am mentally prepared to see it go to $25. I likely won't sell because I would not buy it back later. I also am managing my expectations for the stock to stay at or below the currentl level thru the end of the year. Right now, I think the stock at 30 times 1997 earnings is a pretty good deal but I likely won't buy any more. (It is 14% of my portfolio). I would sell the stock only if I found a new opportunity that was highly likely to perform better than Ascend at its current level. I think the potential return on Ascend is 50% by the end of 98. I only pass this on to you because I charged hard into Cascade when it started to fall and lost alot of money. Well into Cascade's 1Q 97, mgt was stating that they were comfortable with expectations. Wrongo. I think they were trading at a pe of 70 at the time so Ascend won't likely drop with the same velocity.

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