Just listened to the CC, Gary's notes were accurate. A triumph of transcription, considering Mory's accent.
Not quite emphasized however, was the degree to which questions toward the end of the session became more pointed, analysts more blunt in their desire for guidance on 4Q numbers and beyond.
ASND would not provide any. Brothers, this is not good, IMO.
Would not commit to beating 3Q results in 4Q.
Wouldn't give numbers on TNT 4Q.
Would not commit to equalling 1Q97 numbers ($298MM) in 4Q. 'We cannot anticipate that at this point.'
While North America was flat sequentially (not good but I can live with it), the essence of the shortfall 3Q as we all now know, was Int'l, which was down y/y to $79MM from $119MM. Almost all of this -$38MM of it- was Europe and Japan. Fill in the gap there and ASND would have comfortably met the original 3Q EPS.
So the question for me is, what's up with Europe in Japan? Well, the technical issues are 'gone', but 'billing issues remain unresolved.'
What does that mean? I don't know...Anyone care to speculate?
There is presently a much lower user/port ratio in Europe. Mory: 'networks very below capacity'. Translation: There is already more equipment in place than they have need for. Not a good sign for growth. The problem as he explained it, had something to do with users being charged per minute for local calls to the ISP, ergo, shorter connect times than in US. However, 'Europe will improve in 2H98.' Why this would be so, was not explained in detail.
In Japan, 'they've just 'started marketing the TNT in 4Q, and will not see rapid TNT deployment until next year.'
Okay, suppose I'm an analyst, how would I make a valuation, a forward-looking EPS projection based on what I just heard in the CC? The guidance provided by management was vague, product-oriented, and only bullish in a general sense looking towards second half of 98.
Looking back on this quarter, its clear now the worm turned on Sept. 9, when ASND would not provide guidance at the Tech Conference (I forget the name). Analysts from the big houses knew from checking primary sources the Co. wasn't going to make its number, the question was by how much, and why. Up to that point they had held back on revisions and downgrades. When ASND wouldn't come clean, they dumped it, one after the other, and the stock went through a complete technical breakdown. That's not market manipulation. That's lifeboats getting off the Exxon Valdez. I see management as the Black Hat in this horse opera, not the Street.
Now I'm not trashing the stock, I'm just making observations. But I don't see much momentum in the 4Q. We have UUNet, 'very little' of which was booked in 3Q. Which is good. Beyond that, the newer switching products, the international market...it's starting to look like the climb back to $50 is going to have to wait until March quarter is booked. My sense is, the Street wants to see some money on the table. So do I.
Thanks again, Gary.
I welcome all responses. |
