After-the-bell positive mention of ASND in thestreet.com article
JP Morgan analyst says ASND expects to meet the quarter
thestreet.com
Excerpt: "As for Ascend, a company spokesman says the company
can fill its own gaps. "We have our own security products"
that already address the inevitable chinks in the armor of
routers, says an Ascend spokesman. And the company
expects to meet profit expectations this quarter,
according to analyst William Rabin at J.P. Morgan.
Rabin added that several carriers raved about Ascend's
asynchronous transfer mode products at a J.P. Morgan
conference in Dana Point, Calif. last week."
Top Stories: Internet Security
Systems IPO Approaches With
Anticipation
By Kevin Petrie
Staff Reporter
3/17/98 4:46 PM ET
For Internet Security Systems, paranoia spells
opportunity.
Case in point: Shareholders fled Ascend (ASND:Nasdaq)
stock Monday afternoon the moment word surfaced that
some of the company's products have security holes.
Addressing the problem on Tuesday, Ascend said that
simple measures can patch whatever holes might exist,
but in afternoon trading shares still wallowed at 33 13/16,
down 1 3/16.
Scares like the one Ascend is facing make Wall Street
more fond of Internet Security Systems, or ISS Group,
which is slated to go public March 24. Recent enthusiasm
for Internet security offerings has helped boost interest in
the ISS offering. On March 2, the company expanded the
size of its offering to 3.0 million shares from 2.5 million
shares. The offering's expected range is $14 to $16 per
share.
ISS software products detect both intruders and soft
spots, alerting companies to potential problems with their
Internet boxes -- and that includes the alleged problems
found with Ascend gear. But, as with most good ideas
involving network equipment, ISS faces stiff competition:
the ubiquitous Cisco (CSCO:Nasdaq). Cisco recently
acquired WheelGroup, a closely held rival of ISS.
ISS backers, however, are not deterred. The Internet
security concern has a good lead on WheelGroup, and its
recent revenue record is robust. In addition, many Wall
Streeters believe that ISS could quickly become an
attractive target. Along with Cisco's recent purchase,
Network Associates (NETA:Nasdaq) said it will purchase
Trusted Information Systems (TISX:Nasdaq), or TIS.
"I don't think competing with Cisco is a problem right
now," says analyst Matthew Kovar at the Yankee Group
research firm. ISS has pushed product into the channel
rapidly. Its software likely will prove compatible with more
corporate systems. And players don't need to compete on
price for now, because corporations will pay up for the
peace of mind.
Officials at WheelGroup and TIS could not be reached for
comment. Citing an SEC-enforced quiet period, ISS
simply released a statement. "We were first -- the market
pioneer in security assessment and intrusion detection"
for systems including Windows NT and UNIX. "The need
for ISS to remain focused on this core market niche is key
to our success."
"This space is primed to grow pretty quickly," says Paul
Cook, co-manager of the Munder NetNet fund, a small
Internet-focused portfolio. He estimates that ISS' market
segment will grow revenue at 50% annually for the near
term.
Cook is mulling whether to invest in ISS after listening to
two recent conference calls that were keyed to the IPO.
Already his firm owns shares of Axent (AXNT:Nasdaq),
another ISS rival.
Cook says ISS leads a new breed of security firms whose
software studies the full range of network connections for
soft spots. Previously, security concerns focused on
single network sections, but that piecemeal approach has
grown less effective as hackers devise new ways of
worming past conventional firewalls.
The price tag isn't bad, Cook says, adding that the
suggested market cap is roughly nine times the revenue
expected for 1998.
To be sure, ISS will command a premium. The suggested
offering price values ISS at 17 to 19 times 1997 revenue --
the high end of the range for its group. TIS will sell to
Network Associates for roughly 7 or 8 times trailing
revenue; Axent now trades at about 13 times revenue.
Privately held Wheelgroup is going to Cisco for 16 to 18
times revenue, using a published report of $7 million in
1997 sales.
Marquee names dot ISS' prospectus. Goldman Sachs is
lead underwriter. Kleiner Perkins Caufield & Byers,
arguably the richest venture capital spring in Silicon
Valley, will own nearly 9% of ISS stock after the offering.
Over 16% will fall in the hands of Greylock, which
invested in the recent IPO success DoubleClick
(DCLK:Nasdaq).
Goldman said Tuesday that the IPO will be priced the
evening of Mar. 23. With 16.4 million shares outstanding,
the offering would value ISS at $229 million to $262
million.
Wall Street shouldn't hold its breath for earnings. In the
fourth quarter ended Dec. 31, ISS grew revenue to $5.1
million from $2.2 million one year earlier (most revenue
comes from licenses). The net loss widened to $1.9
million from $222,000 in the year-ago period. The
company expects to post losses for the foreseeable
future.
As for Ascend, a company spokesman says the company
can fill its own gaps. "We have our own security products"
that already address the inevitable chinks in the armor of
routers, says an Ascend spokesman. And the company
expects to meet profit expectations this quarter,
according to analyst William Rabin at J.P. Morgan.
Rabin added that several carriers raved about Ascend's
asynchronous transfer mode products at a J.P. Morgan
conference in Dana Point, Calif. last week.
See Also
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