Found this in the WSJ Interactive:
Ascend Off 7%; Rumor Of 3Q
Pre-Announcement Cited
By Janet Morrissey
NEW YORK (Dow Jones)--Ascend Communications Inc. (ASND) stock
plummeted 8% in heavy trading Monday as many traders cited concern the
company will preannounce a third-quarter earnings shortfall after market close.
The concerns were aggravated as Robertson Stephens & Co. became the
latest analyst to downgrade the stock.
Ascend officials weren't immediately available for comment.
Investors have been worried about the company's prospects for the quarter
for some time. Last week, the stock was hit after the company announced a
price promotion. Analysts interpreted the promotion as a sign Ascend needed
to boost sales to meet third-quarter earnings projections.
Ascend shares were off 2 3/4, or 7.8%, at 32 1/2, on Nasdaq volume of 33.6
million shares, compared with average daily volume of 9.6 million,
Goldman Sachs & Co. recently lowered its earnings estimate for the Alameda,
Calif., company, while Salomon Bros., Merrill Lynch & Co. and Everen
Securities Inc. were among those downgrading their ratings.
Robertson Stephens & Co., in slashing its rating and earnings projection
Monday, cited weak demand from international markets, especially Europe,
and lower-than-expected U.S. orders. The firm said it sees the slump hurting
third-quarter earnings. The report also "calls into question" the company's
results in the fourth quarter.
"This is the fourth consecutive quarter the company has struggled to meet
expectations, " said the Robertson Stephens report, "and the outlook remains
limited."
Despite "extenuating circumstances" cited by the company in previous
quarters, the report said, "a pattern has developed."
The company's July sales and earnings fell short of analysts' expectations.
Robertson Stephens dismissed suggestions that weak demand is the result of
technology transitional issues. Instead, it cited the aggressive stance taken by
3Com Corp. (COMS) and Cisco Systems Inc. (CSCO), which have made
the sector fiercely competitive.
"Competitive pressures are building in the market for remote access
concentrators and the end result has been significantly lower pricing from all of
the vendors," the analyst's report said.
It said Ascend's move to 56K modem technology has only added to the
uncertainty in demand.
Robertson Stephens cut its estimate to $1.17 a share from $1.40 for fiscal
1997 and to $1.29 a share from $1.92 for fiscal 1998.
Another analyst, Peter T.T. Lieu of Adams Harkness & Hill Inc., said, "there's
a serious credibility problem." He said market watchers have been
recommending the stock based on "product efficacy, market-share gains,
conservative accounting," he said, and one by one, the company has failed to
deliver.
"The momentum is burning out," Lieu said. "Investors are giving up on the
company."
If changes are not made to Ascend's management or to fix the technical issues,
he said, the company's long-term viability is in jeopardy.
Another analyst, Terrence McCrary from Auerbach Pollak & Richardson,
also cited soft European orders, which account for 50% of the company's
revenues, for triggering the stock price slide. He added that transitional
problems with the company's 56K technology were exacerbated last week
when an international standards body postponed its ruling on the 56K
modems.
However, McCrary believes market reaction has been "overblown at this
point." |
