Gary, of the 6 inches of paper I read..I thoguht this was the best 1000 words on asnd.
Dow Jones Online News, Tuesday, September 16, 1997 at 17:21
NEW YORK -(Dow Jones)- Concerns that Ascend Communications Inc. will
miss third-quarter projections have created an atmosphere in which any
bit of information or whisper of a rumor - true or false - crushes the
stock.
The stock fell 8% Monday on rumors Ascend (ASND) was about to
prerelease disappointing third-quarter numbers. At the close Tuesday,
the company's shares were off $1.188 at $33.688. So far, however, the
rumors have turned out to be false - at least so far. And Dillon Read &
Co. analyst Robert MacLellan said such predictions have been swirling
for some time.
Also, the shares of the maker of networking equipment fell 6%
Thursday after experts interpreted a price promotion on the company's
MAX product line as a sign that Ascend needs to boost sales to meet
earnings projections. But according to Hambrecht & Quist Inc. analyst
Joseph Noel, the "MAX Value" program was a planned promotion designed to
get rid of excess inventory.
As Ascend continues to keep quiet on what it projects for the third
quarter - in part because its results largely depend on how it does in
the final weeks of the period - Wall Street has been left guessing as to
what to expect from the Alameda, Calif., company.
And the lack of solid direction has created a vacuum in which any bit
of news or rumor has sent investors scrambling to exit the stock.
A slew of analysts have lowered their ratings and earnings estimates
on Ascend in recent weeks on concerns the company is seeing weak sales
in Europe and is coping with some difficulties getting the software on
its 56K modem cards to interface properly with the operating system
software on its remote access switches. MacLellan said those
difficulties caused a two-week delay in product shipments in the quarter
and were compounded by unexpectedly high demand for 56K modems.
MacLellan said third-quarter sales suffered because Ascend had to
pull its sales force off the floor for a week to educate them about the
products the company acquired with its purchase of Cascade
Communications Corp.
Many analysts have been lowering their estimates for the quarter to
about 29 cents to 30 cents a share from 36 cents in recent weeks.
Noting that some analysts are still projecting Ascend will report 34
cents a share for the quarter, MacLellan said he believes the company
will pre-announce its results only if the views don't come down fast
enough to "around 30 cents plus or minus a few pennies" or if it looks
as if Ascend will fall short of that target.
MacLellan cut his third-quarter numbers on the company to 34 cents a
share from 36 cents about a month ago and then to 29 cents last week.
Noel cut his to 35 cents a share from 36 cents a week ago and to 33
cents Monday.
The company earned 29 cents a share in the third quarter of 1996.
Ascend is scheduled to release its numbers in mid-October.
According to Noel of Hambrecht & Quist, the problems with the 56K
modem card have been much more pronounced in Europe than the U.S.
European shipments started later, he explained, and Ascend faces a
different set of standards and has more new customers there.
As a result, Noel said Ascend claims that while it has orders in
Europe, it hasn't been able to deliver many products there. The analyst
expects the company to resolve product problems for some - but not all -
of its customers and ship to them before the end of the quarter.
Other analysts, including Robertson Stephens analyst Paul Johnson,
also have expressed concerns that Ascend has come under pricing pressure
as a result of competition from 3Com Corp. (COMS) and Cisco Systems Inc.
(CSCO).
Although some analysts upgraded Ascend after it indicated in mid-July
its acquisition of Cascade wouldn't be dilutive, the company sent Wall
Street a warning signal on Aug. 8 in the form of an 8K filing with the
Securities and Exchange Commission.
In the filing, Ascend said it had earned two cents a share on revenue
of $63 million in July. Since third-quarter estimates at that time for
earnings of about 36 cents a share on revenue of $330 million, it then
became increasingly clear that the quarter would be back-end loaded,
MacLellan said.
And since the company's August results weren't much better than
July's, analysts have become even more certain that Ascend must make up
the bulk of its results this month to meet earnings estimates.
"It's clear that the quarter will be a stretch," MacLellan said.
He said that since it usually takes Ascend about 30 days to deliver a
large order, every day that an order is pushed back increases the
likelihood that it will go into the fourth-quarter results.
Despite the widespread concerns about Ascend's third-quarter results,
Noel is telling investors to start buying the stock now because he
believes the company's problems are short term.
Predicting Ascend will recover next year, Noel pointed out that the
company is in a "growth business." The analyst explained that since
Ascend's products have a lot of capacity, they appeal to the large
Internet access providers, which he expects to dominate the industry
going forward.
"There's real value here," Noel said. "Who cares about the September
quarter?" Noel projects Ascend will $1.37 a share in 1997 and $1.80 in
1998. And MacLellan expects the company will earn $1.24 a share this
year and $1.79 next year. Ascend earned $1 a share in 1996.
Company officials didn't return phone calls. |
