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Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: Daniel who wrote (12953)	8/24/1999 8:35:00 PM
From: pat mudge	Respond to of 18016

Hot off the press: >>>> August 24, 1999 19:10 FOCUS-Newbridge breezes by expectations By Susan Taylor OTTAWA, Aug 24 (Reuters) - Newbridge Networks Corp. squeaked by expectations with its first-quarter results released on Tuesday, beating consensus estimates of 18 U.S. cents per share by 2 U.S. cents. But analysts said they have more work to do before they could get back in the investment community's good books. The Ottawa-area based networking firm reported a profit of C$47 million, or 26 Canadian cents per share, for the quarter ended August 1, compared to a profit of C$35 million, or 20 Canadian cents per share last year. Sales of C$495 million were up from C$426 million. Both First Call/Thomson Financial and IBES International had posted consensus estimates of 16 U.S. cents per share. "We're higher in revenue and higher in earnings than analysts expected," President Alan Lutz told Reuters. "Quite honestly, it all boils down to our fundamental product lines growing rapidly." Record revenue was boosted largely by a 12 percent gain over the previous quarter for the firm's wide area network technology, which recorded sales of C$357 million. That revenue, 72 percent of total sales, includes a 16 percent sequential increase in sales for Newbridge's flagship asynchronous transfer mode (ATM) technology, which sends multimedia signals over telecommunications networks at high speeds. Cost control also helped boost the results, as expenses rose just C$3 million over the previous quarter to C$209 million despite a C$12 million increase in payroll following a corporate-wide salary review. R&D costs increased just marginally to C$67.6 million. "The first quarter's actually our lightest quarter," Lutz said. "It's really nice to hit the ball this way." Still, Lutz told analysts on a conference call on Tuesday evening that he wanted to be conservative and suggested they not upgrade estimates. First Call/Thomson Financial consensus for the second quarter is 22 U.S. cents per share, followed by 26 U.S. cents and 31 U.S. cents per share for the third and fourth quarters. The market is watching Newbridge's performance closely after the firm issued profit warnings in five of its last eight quarters. The first-quarter results take the firm a step closer to credibility, but more work remains, said one analyst. "It's good, but it's not a blowout. They need to do two more of these quarters before the investment community trusts them again," said Paul Sagawa, analyst at Sanford C. Bernstein in New York. He added revenue came in a shade under his expectations. "One quarter does not get them back. They dug themselves a substantial hole. It's a lot to ask investors to forgive and forget," he said. A significant backlog of orders that Newbridge couldn't fill in last quarter helped boost this set of results. The firm's book-to-bill ratio stands at about one. Production has been largely overhauled, Lutz said, and the company does not expect to miss any orders in the future. "We haven't solved everything, but we've solved all the important things," Lutz said. The market is also waiting on Newbridge to unveil details of its Internet strategy, but Lutz would say only that an announcement was imminent. The firm has hinted it will soon announce investments in firms that develop Internet equipment. "I'm going to smile like a demure young maiden and make people wait for a little bit," Lutz told Reuters. "We're going to tantalize here, but you'll have a story shortly." Newbridge shares closed at C$40.95 on the Toronto Stock Exchange on Tuesday before the results were released, a gain of C$1.45. On the Nasdaq, the issue gained $1.31 to close at $27.56 ($1=$1.49 Canadian) >>>>>> I hope the mainstream analysts aren't as jaundiced as Sagawa. Of course, if NN had come in 5 cents ahead of expectations, they'd have been criticized for poor guidance. The truth is Alan kept expectations under control and indicated he plans to maintain that control, first by not letting BTB raise the bar and second by not letting analysts extrapolate higher FY numbers based on increased EPS. Managing analysts' expectations is like herding kindergartners through a zoo. Okay, that's it for now --- or until the next press. :) Pat