One more analyst's cheering!
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08:15am EDT 16-Oct-98 Credit Suisse First Boston (Trivella, Tom (212) 325-2478)
AM Call: First Edition - 10/16/98 - Part 1-5 FBC
CREDIT SUISSE FIRST BOSTON CORPORATION
Equity Research
October 16, 1998
FIRST EDITION
ESTIMATE CHANGES
Vitesse (VTSS, $24.438, STRONG BUY) Target (12 Months): $35
Charlie Glavin, CFA 415/836-7715 charlie.glavin@csfb.com
FY4Q99 Beats Consensus on Broad Strength.
Vitesse reported FY4Q99 EPS of $0.21, beating our estimate and
consensus estimate of $0.20. Revenue of $54 million was stronger
than we expected, and a sequential increase of 17% (up 67% over
last year). Revenue strength occurred over all three of VTSS'
segments: Telecom (up 22% sequentially), Datacom (up 15%), and
ATE/Testing (up 9%). Gross margin improved 60 basis points,
reinforcing our belief that VTSS' new Colorado fab is about one
quarter ahead of its yield ramp. Further revenue growth and margin
expansion is expected, with new designs and orders keeping
visibility and backlog high. EPS comparisons are tough due to a
change in tax rates, higher share count, and a drop in interest
income (due to the recent drop in interest rates). FY 1999 EPS
estimate is unchanged at $0.83, but our CY1999 estimate increased
to $0.91 (formerly $0.89). We maintain our STRONG BUY rating with
a 12-month $35 price target.
Annual Prev.
EPS EPS
9/99E $0.83 NA
9/98A $0.67 $0.66
PMCS (PMCS, $34.625, BUY) Target (12 Months): $40
Charlie Glavin, CFA 415/836-7715 charlie.glavin@csfb.com
Results Beat Consensus; Raising Estimates. PMCS reported 4Q98 EPS
of $0.29, beating our estimate and consensus of $0.28 due to
continued strength from networking products. This strong growth in
the networking business offsets the focused ramp down of legacy
products, while residual legacy revenue continues to provide
opportunistic margin windfall for funding future product
development (especially in ethernet). Promising new S/UNI and EXACT
products look to impact 1999 revenue, and other designs and design
win activity should also continue to generate sustainable growth.
While gross margin is expected to decline from the very high levels
of 1998 (above 75%) , as ethernet products ramp into volume, we are
increasing our Q498 and 1999 estimates (to $0.30 and $1.34,
respectively) to reflect the revenue impact from PMCS's emerging
strength in higher level networking products. We maintain our BUY
rating with a revised 12-month price target of $40.
Annual Prev.
EPS EPS
12/99E $1.34 $1.26
12/98E $1.17 $1.16
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