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Technology Stocks : Cascade Communications (CSCC)
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To: Bill McCullen who wrote ()2/21/1997 11:46:00 AM
From: Bill McCullen   of 3743
 
Second try:

All;

This is my first post on this thread which I have been following for some time. I have been bullish on CSCC but this prolonged downturn leads me to believe that there is more bad news on the way. For the stock not to find any support or experience any bounce since the earnings report must mean that their fundamental business position has changed, and the big boys know it. As was mentioned in an earlier post, the tape doesn't lie. Compare it to COMS. The news out of COMS was, on the surface, much worse than CSCC yet COMS has found some support.

CSCC reminds me very much of BAY a year or so ago. BAY's stock started to tumble but it looked "cheap" compared to forward earnings estimates. The problem was those forward earnings estimates were bogus because BAY's position in the market had changed. BAY stuggled to meet estimates by scrambling at the end of quarters to pull in sales (sound familiar). Ultimately, it caught up to them and the stock is 60+ % off its high.

For CSCC the situation is exacerbated by the extremely high valuation given to the company. Thus, though it may be down ~70 % from the high there could be a long way to go. It still trades at ~ 40X trailing and 25X '97 estimates (if accurate). My speculation is that the growth expectations for CSCC are overblown and that is why the stock is getting crushed. The competitive landscape is tougher than ever as the CSCO/STRM combo looks strong and NN, FORE , Nortel and ASND also look formidable.

Regarding insider selling, I have no idea how many shares the CEO owns, but even if it were in the millions, for him to register to sell ANY shares now is unfathomable. What is this man thinking! To sell into a decline the likes of which is usually reserved for companies with some sort of legal problems (i.e. CTN or BEAM) is stunning.

I hope I am wrong about CSCC as I am still long a very small position (100 shares) bought in the high 30s with hopes of a bounce. [I am really tired of hearing about the proverbial "falling knife"].

Regards,

Bill
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