Derek and All, <off-topic, sort of>
3 Stories, first one on ASND, I didn't notice any mention in this take about slow PC sales being one of the excuses.
09/30: Networker Ascend's Shares Descend Rapidly After Profit Warning
ALAMEDA, Calif. -(Dow Jones)- Investors continued to turn bearish on Ascend Communications Inc. Tuesday, sending shares of the computer-networking products concern sharply lower amid a disappointing earnings outlook and ratings downgrades by top-notch brokerage firms.
Ascend late Monday said it expects third-quarter earnings to fall well shy of analysts' expectations and year-ago results on lower-than-anticipated revenue amid some delayed shipments and weakened demand for some products.
The company said it expects earnings for the quarter ending Tuesday to range from 18 cents to 20 cents a share. A First Call survey of 26 analysts yielded a mean estimate for third-quarter earnings of 31 cents a share.
In the year-ago quarter, Ascend reported income from operations of 29 cents a share, excluding acquisition-related charges.
Third-quarter revenue will range from $260 million to $270 million, compared with $249 million a year ago, Ascend said.
Ascend said it is experiencing a "significant shortfall in revenue" this quarter related to delays in the rollout of its MAX TNT product, a wide-area-network access switch, to international customers. Among other problems, the MAX TNT has cut off dial-in users and overheated.
"It doesn't work," said Adams Harkness analyst Peter Lieu, adding that Ascend "has had to discount like crazy to get people to take it."
Ascend said revenue also was hurt by soft demand for access ports in selected geographic regions outside of North America. The company said demand for PCs in Japan slowed throughout the year, resulting in a slowdown in demand for ports, while subscriber growth in Southern Europe has lagged behind the network build-outs that took place earlier this year.
Ascend said it expects to release final results Oct. 9.
The earnings warning prompted Morgan Stanley to lower its investment rating on the stock to "outperform" from "strong buy," while BT Alex. Brown cut its rating to "market perform" from "buy." Three other brokerages, including Everen, Volpe Brown Whelan and DLJ chimed in with downgrades.
At the close Tuesday, Ascend (ASND) shares were off $2.875, or 8.16%, at $32.375, on volume of 33.8 million shares traded, exceeding average daily volume of 10.8 million shares.
In January, Ascend's stock price crashed clear down to $32 from almost $80, when its $10 billion market capitalization was an order of magnitude larger than the Internet-access hardware market that Ascend served.
The company has had trouble getting its TNTs to run at the top modem speed of 56,000 bits per second. Another new product, Ascend's GRF switch, also performs slower than originally advertised. This month, Ascend announced a three-for-the-price-of-two sale on its high-end MAX 4048 systems if ordered before the quarter's end. The company says it won't elaborate until it reports results next month.
Besides the gremlins in its hardware, Ascend must now contend with a devilish rival: Cisco Systems Inc. In January, Cisco (CSCO) lacked a top-end product that would be suitable for telephone carrier-class customers, but now it has one: the AS5300, which like the TNT can handle about 2,500 callers in a seven-foot rack.
Don Listwin, who runs Cisco's Service Provider business, says the AS5300 has powerful processors that will allow customers to offer services like low-priced faxing and voice mail over the Internet. This week, Cisco will make that digital-modem technology available across its line of Internet-access products.
Cisco's new gear and competitive pricing have won it a growing roster of large customers, including the business-Internet ventures of Ameritech Corp. (AIT) and British Telecomunications PLC (BTY), both of which had used Ascend and 3Com Corp.'s U.S. Robotics unit for their consumer Internet services. Denise Barton, who studies the Internet infrastructure market for Dell'Oro Group in Portola Valley, Calif., confirms that Cisco's market share has climbed from nothing to about 14%, while Ascend's has stalled at about 37%.
Ascend missed a transition taking place in the Internet, claims Litwin. Increasingly, the 'Net will be used by businesses as an extension of their private voice and data networks, so they have high expectations of security and reliability. Ascend approached the Internet business from a marketing perspective rather than an engineering perspective, Litwin claims.
Ascend in June acquired fellow networker Cascade Communications Corp., a $3 billion marriage aimed at becoming more of a one-stop shop to better compete with Cisco. Ascend is trying to protect its lead in remote-access servers, which allow users outside an office to call in and connect to networks or the Internet. Cascade specializes in advanced switching technologies known as asynchronous transfer mode, or ATM, and frame relay.
Copyright (c) 1997 Dow Jones & Company, Inc.
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10/01: Japanese Interest Rates Hit All-Time Low On Bleak Economic Review
By Chikako Mogi Staff Reporter
TOKYO -(Dow Jones)- Japanese interest rates dipped to another all-time low Wednesday, after the Bank of Japan's quarterly business survey provided more powerful evidence that the country's economy is teetering on the edge of a recession.
The closely-watched business condition diffusion index for big manufacturers fell to plus-three from plus-seven in the previous survey three months ago - worse than the plus-five reading predicted by analysts.
"There was no good news" in the latest survey, known as the Tankan in Japanese, said Masaru Takagi, chief economist at Fuji Research Institute. "It raised questions about the economy and confirmed fears about recession."
Japanese government bond prices surged on the report, with the yield on the benchmark 10-year issue falling as low as 1.785% - the lowest yield seen this century on any advanced-country long-term government bond. Tokyo share prices and the yen fell sharply on the survey's release, but managed modest recoveries by the end of trading in Asia. The benchmark Nikkei 225 index ended with a loss of 45.55 points, or 0.3%, at 17842.16, after having been down 300.
Economists said the worse-than-expected survey news underlined the perilous state of the economy, especially in light of the recent news that Japan's gross domestic product contracted by an annualized 11.2% in the second quarter.
Even the Bank of Japan conceded that the economy is slowing. But the central bank refused to change its longstanding assessment that the basic trend of moderate economic recovery is continuing.
"We don't need to change our assessment that the recovery trend remains intact, just as a result of the tankan alone," said Masayuki Matsushima, director of the central bank's research department.
Matsushima later said at a seminar that the pressures on Japanese consumers are at their worst, following the April 1 rise in the consumption tax to 5% from 3%, and other tighter fiscal measures. He added that, while consumption will likely recover, its pace and strength need to be watched closely.
Matsushima also expressed caution about a buildup in corporate inventories, though he denied suggestions that this is derailing the general trend toward economic recovery.
The survey's diffusion indexes for big nonmanufacturers, small manufacturers and small nonmanufacturers all deteriorated compared with readings three months ago - the first time since August 1995 that all four indexes fell from the previous survey.
But Mamoru Yamazaki, senior economist at Paribas Capital Markets Ltd. in Tokyo, said the capital-spending plans for Japanese companies remain solid. The deterioration in sentiment wasn't surprising given the lasting impact of the April sales-tax increase on the wider economy, he added.
But he also cautioned that there's a danger that the pessimistic outlook of many Japanese companies could itself trigger a revision of capital-spending plans, thus slowing the economy further. "I'm concerned that sentiment is running ahead of the real economy and may end up hurting growth," Yamazaki said.
A recession in Japan would involve several factors, including negative growth for six months and leading indicators dropping to near zero. Economists said they can't be sure when it may be possible to call the start of a recession, or how long it might last, but they said the risk of one developing has increased.
It's also increasingly clear that a more expansive fiscal policy is the only real solution to pulling the economy away from the brink, economists said. The Bank of Japan's ultralow interest-rate policy will continue until at least the end of the current fiscal year - which ends March 31, 1998 - but may not in itself be enough to revive the economy, they added.
"It's clear that the (central bank) will maintain the current easy policy for at least the next six months," Yamazaki said. Japan's official discount rate stands at 0.5%, a historically low level.
But some fiscal measures are politically difficult, such as any attempt to renew the special income tax cuts which were terminated this fiscal year. Takagi said such a step would help by pumping about 2 trillion yen ($16.6 billion) into the economy and boosting consumption by about 0.4%.
More politically feasible would be drastic tax cuts in other sectors - such as a move to abolish taxes on land transactions, economists said. "It's a matter of correcting a distorted policy mix, and easing the grip on fiscal tightening," Takagi said.
But the central bank's Matsushima said the current goal of bringing Japan's burgeoning fiscal deficits to a sound state should be maintained, suggesting that the current policy mix should be kept - a tight fiscal policy and an easy monetary policy. He added that if the government changes its stance on fiscal policy, that in itself would further undermine national confidence.
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10/01: Harmonic Lightwaves Warns Of 3rd-Quarter Drop In Earnings
SUNNYVALE, Calif. -(Dow Jones)- Harmonic Lightwaves Inc. said Wednesday it expects to report third-quarter earnings per share of between 3 and 5 cents on sales of about $17.5 million, well below the 14 cents a share that analysts were expecting.
The company (HLIT), which makes products for the delivery of interactive services over broadband networks, issued its news after the market closed. At the close, the company's shares were off 18.8 cents at $16.188.
In the year-ago third quarter, Harmonic reported net income of $1.7 million, or 15 cents a share, on sales of $16.7 million.
The company said revenue declined from $20.5 million in the second quarter due to lower shipments to both domestic and international cable customers. Several of its international customers reduced capital spending on new networks as they focus on marketing and customer service strategies to expand their subscriber base, Harmonic said.
Some domestic cable customers are consolidating and trading existing networks, delaying network upgrades. Other customers slowed their implemention of new technologies while the industry continues to formulate its digital transmission strategies and evaluate new systems, the company said.
Harmonic said it believes the slowdown in third-quarter sales reflects a "transitional period" for the cable industry.
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All Rights Reserved. |
