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Technology Stocks : Westell WSTL

WSTL 5.760

+0.2%

Dec 31 3:47 PM EST

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To: mike cobble who wrote (7261)	10/24/1997 10:06:00 AM
From: jim detwiler	Read Replies (2) of 21342

Alex Brown OUTLOOK We believe that this merger, although seemingly rich, will ultimately pay large dividends to the merged organization. To date Westell was viewed as a systems company that may have an early lead but had little staying power because of its absence of intellectual property and tangible DMT offering. Amati was viewed as an outstanding technology house that did not have the infrastructure or systems expertise to spearhead a mass deployment. The merged company has the entire package, technical expertise and systems level experience. Time will tell but we believe that this merger may have opened the door to second-source opportunities with the Joint Procurement Consortium RBOCs who initially selected a DMT Alcatel solution. Note that Amati recently signed an interoperability and technology sharing agreement with Alcatel. For the long term (one to two years), today's acquisition dramatically strengthens our position that Westell is a must own stock for those who believe that ADSL will be deployed in mass in North America. In the near term (one to three months) the stock will likely be event driven by the following events. 1) GTE Deployment announcement: GTE has only been trialing Westell (80% of lines deployed)and Amati (20%) equipment. The merger implies that Westell/Amati will be the sole supplier to GTE. While rumors abound that GTE will announce its deployment plans at Interop next week, we do not believe that this is a foregone conclusion. GTE will announce its ADSL plans when its entire strategy is defined and no sooner. A more believable time frame would be by the end of the year. 2) British Telecom Announcement: This is the worst kept secret in the ADSL market and will most likely also occur by the end of the year. We expect Westell to receive half of BT's ADSL business in partnership with Fujitsu who will supply the transmission equipment. Alcatel should win the other half of the contract. 3) Bell Canada Deployment Announcement: Bell Canada has filed an ADSL tariff and seems ready to offer service. Immediately prior to the Westell/Amati merger announcement all indications were that Alcatel had beat out Westell for the contract because of Westell's lack of an immediate DMT solution. Today's merger has complicated Bell Canada's decision but we are assuming that Alcatel will win this contract. We are not going to introduce FY 1999 numbers until we get a better feel for the ramp of ADSL deployment that we believe will begin in earnest in CY 1998. We will certainly introduce FY 1999 numbers by the end of this calendar year. For FY 1998 we have lowered our F4Q (March) EPS by $0.02 to a loss of $0.09. Although Amati has begunOUTLOOK We believe that this merger, although seemingly rich, will ultimately pay large dividends to the merged organization. To date Westell was viewed as a systems company that may have an early lead but had little staying power because of its absence of intellectual property and tangible DMT offering. Amati was viewed as an outstanding technology house that did not have the infrastructure or systems expertise to spearhead a mass deployment. The merged company has the entire package, technical expertise and systems level experience. Time will tell but we believe that this merger may have opened the door to second-source opportunities with the Joint Procurement Consortium RBOCs who initially selected a DMT Alcatel solution. Note that Amati recently signed an interoperability and technology sharing agreement with Alcatel. For the long term (one to two years), today's acquisition dramatically strengthens our position that Westell is a must own stock for those who believe that ADSL will be deployed in mass in North America. In the near term (one to three months) the stock will likely be event driven by the following events. 1) GTE Deployment announcement: GTE has only been trialing Westell (80% of lines deployed)and Amati (20%) equipment. The merger implies that Westell/Amati will be the sole supplier to GTE. While rumors abound that GTE will announce its deployment plans at Interop next week, we do not believe that this is a foregone conclusion. GTE will announce its ADSL plans when its entire strategy is defined and no sooner. A more believable time frame would be by the end of the year. 2) British Telecom Announcement: This is the worst kept secret in the ADSL market and will most likely also occur by the end of the year. We expect Westell to receive half of BT's ADSL business in partnership with Fujitsu who will supply the transmission equipment. Alcatel should win the other half of the contract. 3) Bell Canada Deployment Announcement: Bell Canada has filed an ADSL tariff and seems ready to offer service. Immediately prior to the Westell/Amati merger announcement all indications were that Alcatel had beat out Westell for the contract because of Westell's lack of an immediate DMT solution. Today's merger has complicated Bell Canada's decision but we are assuming that Alcatel will win this contract. We are not going to introduce FY 1999 numbers until we get a better feel for the ramp of ADSL deployment that we believe will begin in earnest in CY 1998. We will certainly introduce FY 1999 numbers by the end of this calendar year. For FY 1998 we have lowered our F4Q (March) EPS by $0.02 to a loss of $0.09. Although Amati has begun

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