The short case.
I have been both long (and lost money) and short (made money). I am currently short.
WSTL has invested a lot in ADSL to get in a lot of the pilot trials. But the market is very slow to get going. The longer it takes, the better the chances that larger companies with established relationships with the customers get the sales. I think 3Com, Ascend, PAIR and Alcatel are going to do very well in this market.
WSTL has a small core business that is profitible but not growing. Even they now admit ADSL won't happen in 1998. So you are stuck with a company selling at a very high multiple of sales to bet on a new technology they are getting less likely to benefit from.
The TI partnership is a paper tiger. That was just a way to try and put a good face on the Amati breakup. Losing Amati was a disaster for WSTL. WSTL has very little of its own technology. Amati was dominant in DMT which seems to be the emerging standard. Now TI owns that technology and they will sell to everybody. The deal with WSTL only offers some advantage on availability and pricing. The exact terms have not been released. Given WSTL's history of when they don't release details, it probably isn't that great of a deal.
WSTL has been the leader in CAP systems. CAP technology is owned by Globespan. There is a reasonable possibility that WSTL's pilots switch over to the new DMT standard. WSTL is developing DMT systems now, using TI/Amati technology.
On the plus side, I do like WSTL's new CEO. He is much more upfront about the problems and less of a hypester. This is bad for the stock price in the near term, but might enable the company to survive.
They do have a lot of cash, but are spending it at a dramatic rate. The CEO talked about reducing expenses which is vital at this point. I think their best hope is to sell the company now. Time is probably not on their side. The stock price looks low, but the valuation is still high. Maybe it has bottomed, but I can easily see this stock going to 5.
Sorry for the cold water. |
