[USRX Announcement] How much does Dakin know?
Sorry for the duplicate posting--Pat beat me to the punch!
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Top Stories
U.S. Robotics to Make ADSL Announcement
March 11, 1997
While it hammers out plans to be purchased by 3Com (COMS:Nasdaq), U.S. Robotics (USRX:Nasdaq) may be close to striking a smaller deal with a provider of "ADSL" products, according to officials at U.S. Robotics.
Two company officials say that USRX will make an announcement Wednesday morning concerning ADSL. While ADSL, which refers to "asymmetric digital subscriber lines," may take its time in gaining popularity, larger companies like USRX are already searching for possible products in the ADSL universe.
More than likely, USRX will announce the formation of some kind of alliance with an ADSL firm. Anything more intense, such as a merger, is unlikely, given that USRX is close to moving into 3Com.
Among the chief ADSL candidates, Amati Communications (AMTX:Nasdaq) has emerged as the most likely one. By cooperating loosely on development and marketing efforts, as it has with other large partners, Amati could gain access to customers, support systems and capital. And USRX could gain a crucial technology. Any deal would require the blessing of 3Com, which might limit the scope of any arrangement.
"It is my understanding [U.S. Robotics] will end up using Amati technology," says Joel Achramowicz, networking analyst at Dakin Securities, referring to sources at U.S. Robotics. Achramowicz rates Amati a buy; his firm has performed no underwriting for the three companies.
Other possible alliance candidates include PairGain Technologies (PAIR:Nasdaq) and Aware (AWRE:Nasdaq). PairGain, which builds related products that fall under the "xDSL" label, on Tuesday finalized the purchase of Avidia, which makes higher-end network components. Aware has shown a willingness to enter partnerships; Tuesday it announced it was shipping ADSL chipsets produced in conjunction with Analog Devices (ADI:NYSE).
But only Amati, which trades at just under 14, well below its 52-week high of 36 1/2 reached in May, owns the primary patents for standardized "algorithm" for such systems. And despite the recent price drop, Amati, with a market cap of $241 million, trades at 18 times sales for the trailing 12 months, a rich valuation.
Amati's ADSL devices shuttle data and especially video signals through plain old copper phone lines at lightning speed. They save telephone companies the hassle of installing new fiber-optic lines in order to provide Internet connections, or, perhaps in the future, cable television services.
Amati has already reached alliances with closely held XEL Communications, NEC Corp. (NIPNY:Nasdaq ADR) and Texas Instruments (TXN:NYSE).
Officials at Amati and U.S. Robotics declined to confirm or deny any negotiations. 3Com spokeswoman Leslie Davis said "we are two separate companies" until the proposed USRX merger goes through, and referred all inquiries to USRX. Davis says 3Com is mulling ADSL options, but the company has not announced any specific plans.
3Com builds PC "adapter cards" and other network gear, but to date it has no strong presence in ADSL.
A possible hint that Amati is close to a big alliance is the lack of corporate insider buying and selling. If company execs are negotiating a big deal, typically Securities and Exchange Commission rules would bar insiders from buying or selling shares. Since director Donald Lucas exercised and sold options on 10,000 shares on Jan. 3, no other trading has taken place, according to the Baseline data service.
By Kevin Petrie
kpetrie@thestreet.com
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Related Story
3Com Grabs U.S. Robotics -- Look for More Nuptials Soon (2/26). What the merger heralds for the networking equipment sector.
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