BA Robertson Stephens says:
that although management dedicated a large portion of its formal comments to the positive longer-term trends in the market for public data networks and remote access, the audience's primary interest was
on near-term business trends.
They stated that investors are focused on looking for evidence
that business has stabilized and demand trends are improving after
the disappointing Q3.
ASND indicated that orders in October were the best first-month orders of any quarter this year.
ASND also indicated that visibility had increased from the weak third-quarter level and that the company is on track to meet analysts' expectations for the December quarter.
BARS says that despite these seemingly positive statements, they remain concerned that although visibility may be higher than it was earlier in the year, the general level of visibility remains quite low.
BARS indicated that ASND revenues in the December quarter are being aided by high demand from UUnet, which announced a large new contract
with Ascend several weeks ago, but international revenues will be weak this quarter because the MAX TNT is not shipping in all of the international markets.
They said that ASND international demand may rebound some in the March quarter as TNT is finally released outside the U.S. at the end of the calendar year, but the U.S. market usually shows some seasonality in the early part of the year, so overall demand remains uncertain for the March quarter.
They added that the international standard for 56Kbps modems is expected during January 1998. ASND stated that with the standard coming, market demand may stall a bit as customers wait for standard-compliant products later in the quarter. ASND indicated that it will take them 6-12 weeks to produce the necessary software code to support the final standard once a standard is approved. BARS feels that this only adds to the uncertainty in the quarter.
In BARS view, the most important incremental news in the meeting was a discussion related to the increasing competitive pressures throughout the market. Ascend has seen increased competition at the low end of the remote access market from Cisco and Livingston (recently announced to be acquired by Lucent Technologies). They said that ASND indicated that the high end of the access market is being affected by
increasing consolidation among ISP and traditional carriers, which appears to be delaying purchases by some of the vendors.
ASND commented that it believes that list prices in the market for both access concentrators and frame relay switches would be under pressure in the early part of 1998, with "list" prices falling as much as 20-30% next year in both markets.
BARS said that ASND is confident, however, that "street" pricing will not fall as much as list prices next year because street prices have been under pressure for the past several quarters and list prices have not kept pace with this pressure.
Ascend's management believes that list prices will have to decline to catch up with reality of pricing currently in the market. |
