Ascend Communications (ASND) Message Board

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Technology Stocks : Ascend Communications (ASND)

ASND 211.05

-0.7%

Dec 1 3:59 PM EST

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To: Larry J. who wrote (20916)	11/4/1997 1:15:00 AM
From: Chuzzlewit	Read Replies (1) of 61433

Larry, you're right. I was just trying to illustrate the pitfalls of taking the announcement at face value. I don't believe the actual selling prices of remote access concentrators will decline by 30% unless there is a significant decrease in component costs. Using your assumption of 30% RAC's in the marketing mix, a 30% price reduction would drop the gross profit margin to 61.6%, in which case a revenue increase of about 5.5% would be required to maintain the same gross profit. In which case, a 10% revenue increase would lead to about a 2.8% increase in gross profit in the next quarter, followed sequentially by 10% increases in gross profit for the next three quarters. The result of that scenario is that in four quarters gp would have increased by about 36.8% on an increase in revenues of 46.4%. I definitely like this scenario assuming that SG&A expenses increase only modestly, and the sales mix doesn't shift towards RAC's. Regards, Paul

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