ALL: The key thing is that ESTIMATES for the 4th quarter were raised
by 10 million dollars. The stock price should follow, excluding
stratus revenues. This was all in the conference call:
PALO ALTO, Calif. (Reuters) - Ascend Communications Inc. (ASND - news) said Monday its
third-quarter earnings rose 65 percent, paced by strong sales of computer networking equipment to
Internet service providers and telecommunications companies.
Ascend said its net income rose to $66.1 million, or 32 cents a share on a diluted basis, from $40.1
million, or 20 cents, in the year-earlier period. Revenue rose 37 percent to $370.3 million from
$270.4 million.
The results were in line with analyst forecasts of 31 cents a share, according to First Call Corp.,
which tracks Wall Street estimates.
The No. 5 maker of equipment that links computers in networks won several large contracts during
the quarter ended September 30 from telephone companies. Also, the rapid growth in Internet traffic
has boosted demand from phone companies for Ascend's networking equipment.
Ascend dominates sales of networking equipment -- gear that routes and directs traffic over
networks -- to Internet service providers, telecommunications companies and, increasingly, cable
television operators.
''It was a very strong quarter,'' Michael Ashby, Ascend's chief financial officer, said in an interview.
''We were pleased with the growth in both sides of our business.''
Ascend, as it has gained market share and boosted revenue, is competing more and more against
Cisco Systems Inc. (CSCO - news), the No. 1 networking company, and against
telecommunications equipment companies such as Lucent Technologies Inc. (LU - news) and
Northern Telecom Ltd (NT - news). of Canada.
''We've found ourselves running more into the bigger guys than the smaller guys,'' Ashby said.
The company also told analysts on a conference call that it increased its guidance for fourth-quarter
revenue excluding the Stratus Computer Inc. (SRA - news) business to $410 million from $400
million.
Including $50 million in revenue from the portion of Stratus, Ascend forecast revenue in the fourth
quarter to be $460 million and earnings-per-share of 31 cents. The per-share amount includes about
3 cents related to the Stratus purchase.
Ascend also said it had completed its $948 million purchase of Stratus as a majority of Stratus
shareholders voted to approve the deal Monday. Ascend said on August 3 it would buy Stratus to
create a powerful supplier of Internet-based telecommunications equipment.
Ascend will announce in mid-November agreements to sell the two remaining Stratus software
businesses and by the end of November will announce an agreement to sell Stratus' line of so-called
fault-tolerant computers used by banks and insurance companies, Ashby said.
He declined comment on the potential buyers, but said the company is in negotiations to sell all three
units.
The rise in revenues in the quarter was fueled by substantial growth in so-called access switching
products, which help send voice and fax traffic over networks using a type of transmission protocol
called Internet protocol.
Revenue for its access switching business was 47 percent of revenue, its core systems business was
41 percent of revenue, its enterprise access business accounted for 7 percent of revenue while its
business of servicing the networks it builds was 5 percent of revenue.
All of the businesses except the core systems business rose from the second quarter, Ashby said.
''We see continued strength in the industry,'' Ashby said. ''We really haven't seen any cutback in
capital expenditures'' by customers.
If anything, he said, customers such as phone companies are shifting more of their capital spending
dollars to next generation networks that integrate voice, data and video on one network that send the
information in ''packets.'' And they are paring back on spending money on older, so-called
circuit-switched-based networks.
In the areas of the networking business where Ascend competes, Ashby said industry revenue
should grow 25 percent to 30 percent in 1999 from 1998.
Ascend shares rose 94 cents to $47.875 on the Nasdaq. The Alameda, Calif.-based company
reported its results after the close of regular U.S. trading.
In trading after the close, Ascend slipped to $46.75. |
