Bearish MF thread view on ASND intl growth
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Number: of 476
Author: Digerati
Date: 5/27/98 4:56:27 PM (ET)
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Sorry, I never really focused on the 10-Q. The last statement is interesting, but is not necessarily
contradictory to statements made during the last conference call or at some of the recent
conferences
(H&Q and BARS). Summaries of these conversations appear in various posts on the SI thread.
But the
summary data points include:
- Increases in international sales, both in absolute terms and as a percentage of sales. This was
definitely in the last quarter, but I think was also the case comparing Q4 '97 to Q3 '97 (won't swear
to
the latter, though).
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But the 10-K talks about the last quarter, as discussed on the last conference call! Although 10-Ks
never tell the whole story (Generally Abused Accounting Principles being what they are), flat-out
contradiction of management statements in the 10-K is a little hard to swallow.
Given the choice between a thread on Silicon Investor and the 10-K, I'll choose to believe the
10-K :-)
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But it's relevant because ASND reportedly sees much of their growth
coming from abroad. One report estimated their international sales as 40% of total sales as soon as
1999! So if you are hearing that they are not making any progress in the international arena, I'd
really
like to know.
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Well, we all know that Asia is not going to be the growth market for this coming year. That
basically leaves Europe as the only other significant non-Americas market. I'd like to know what
they're going to do differently to grow from 26% to 40% of revenue in Europe. Ascend basically
has two main revenue generators:
1) Remote access gear (TNT and MAX)
2) Frame/ATM access and WAN switching gear
Remote access is by far the greatest portion (roughly 50% according to the 10-K), and UUNet
accounts for 10-20% of Ascend's *total* revenue (i.e. 20-40% of remote access revenue). As far
as I know, UUNet in Europe doesn't use Ascend gear.
In addition, the most recent figures from Dell'oro et al. show that Cisco, 3COM and Ascend are
more or less level-pegging in terms of remote access concentrator revenue shipments. Ascend and
3COM revenues have been declining and Cisco has climbed.
At the same time, there is considerably more competition in the remote access concentrator space
than ever before: Cisco's AS5800, Nortel's (Aptis') CVX 1800, Lucent PM-4, Bay 5399,
Newbridge/ACC Tigris and a whole bunch of other smaller players. The new Ascend MAX 6000
isn't available in an E1 version, which is surely hampering sales of the MAX 4000 in E1 countries --
i.e. all of Europe. This is especially so after Ascend admitted the 6000 corrects some defects in the
MAX 4000. Price competition also continues to drive down average selling prices.
The frame/ATM market is growing more slowly than the dial market and is a smaller total
addressible market, so it's hard to see how Ascend can grow revenues sufficiently in that area.
Voice over IP is a tiny market (although analyst estimates of total addressible market vary by a
factor of 4!) compared to good old modem dial-up and is unlikely to contribute significant revenues
over the next 12 months. Customer acceptance of products in this space is also unproven.
While xDSL is a fast growing market, it also is much smaller than modem dial and also extremely
competitive. Good old Alcatel competes heavily with Ascend in DSL and has been much more
successful in this arena.
Finally, the GRF gigabit router is a joke. Peanuts in revenue according to the most recent 10-K, the
wise-crack in the industry is that GRF stands for "Get Router Free". This refers to Ascend's
tendency to offer them up as TNT deal sweeteners.
If you've read this board for any length of time, you know I'm an Ascend bear. I don't see how
these conditions translate into almost 100% growth for Ascend revenue in Europe and hence larger
international revenues. Sorry for rambling on, but IMHO there is more momentum investing in
ASND again based almost purely on comments of the same Ascend executives who said everything
was going just great mere weeks before Ascend released dismal results last year.
830ms WestWeb3 |
