Looking for value in communications
'Disparity' abounds in overlooked corner of tech sector
CBS MarketWatch - Last Update: 6:46 PM ET Feb 25, 1999
LOS ANGELES (CBS.MW) -- It's increasingly difficult to find
a bargain in the technology sector these days, but analysts
say you may be overlooking some value plays right under your
nose: communications equipment stocks.
Haves and have-nots
However, Needham & Co. analyst Peter Liu cautions against
generalizing about the industry. "The communications industry is
one of haves and have-nots," Liu said. "The favored companies
have reached unbelievable valuations while there's a huge
disparity between highly-favored and out-of-favor companies."
True, the share prices of Cisco Systems Inc. (CSCO) and Lucent
Technologies Inc. (LU) have more than tripled over the past year,
provoking charges of overvaluation, while the "undesirables,"
Ciena Corp. (CIEN), 3Com Corp. (COMS) and Cabletron
Systems Inc. (CS) crashed. But didn't profit and revenue growth
concerns justify fleeing the less desirable stocks for the
outperformers? Liu doesn't think so.
Bottom feeders
He points out last year Ciena was overvalued before it dropped to
$8 a share. It's since more than tripled. "That was a real opportunity
at the bottom," Liu noted.
Liu is now eyeing 3Com, which has fallen from $50 to $32 since January.
He expects sales to grow 15 to 20 percent in 1999, driven by strong
sales of products like the Palm Pilot.
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