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Technology Stocks : COM21 (CMTO) -- Ignore unavailable to you. Want to Upgrade?

To: nghi vu who wrote (1064)	9/18/1999 9:01:00 PM
From: Srinivasan Balasubramanian	Read Replies (1) \| Respond to of 2347

Barron's - Motorola Deal May Mean More Mergers Also on that list: Terayon, Com21 and Ortel. "Terayon is a technology leader in cable modems," says Steven Levy, an analyst at Lehman Bros. Levy rates the stock Buy and has a price target of 70. (It currently trades at 42 3/4). Com21 also makes cable modems, and Ortel makes optical components for telecommunications. Oft-mentioned potential buyers for some of these niche manufacturers include consumer electronics suppliers like Thomson, Philips and Sony, and telecommunications equipment giants such as Nortel Networks, Nokia and Lucent Technologies. "Lucent has almost no exposure to the cable world," says Levy. "Their largest customer is AT&T, which just bought half the cable market, so it would make sense." Other possible buyers: French telecom equipment maker Alcatel and Cisco Systems, which is trying to get more into the broadband market. Also likely to gain from accelerated implementation of cable-based broadband -- and hence, potential partners or acquisition targets -- are the cable system operators, like Time Warner, Cox Communications, and Comcast. AT&T's purchase of Telecommunications Inc. and @Home's acquisition of Internet portal Excite underscored the promise of high-speed Internet access via cable modems and the importance of having the direct link into the home that can make it happen. (See Weekday Trader, "Excite Deal Shows Cable Modem is King," January 19.) "People want higher speed [and] better bandwidth, and the way to get it is over your cable line," says Paul Rasplicka, who manages the AIM Capital Development Fund. Big cable providers include AT&T and entertainment companies that own cable assets and handle broadband distribution, like TimeWarner and Viacom (which just bought CBS), as well as the pure-play cable companies themselves. "Any increase in speed is going to be good for the owners of the cable plays," says McAdams. At Thursday's closing price of 47 1/8, Antec (which has a market capitalization of $1.7 billion) is 6% off its 52-week high of 50 7/16, changing hands at 51x estimated 1999 earnings of 92 cents, according to First Call. That's a hefty premium to its 25% long-term growth rate. But its 2000 P/E of 34x earnings of $1.37 is a nice discount to its 49% 2000 earnings growth rate and Scientific Atlanta and General Instruments' P/Es of over 40 times 2000 earnings. Terayon (whose market capitalization is just shy of $1 billion), on the other hand, is about 18% off the 52-week high of 56 7/8 that it set in July. And though it won't make money in 1999 and should bring in just shy of a dime in 2000, its 85% long-term earnings growth rate would certainly appeal to any acquirer. Likewise, Com21 (also a small cap, with a market value of $308 million) is, at Thursday's closing price of 14 5/8, nearly 60% off its high of 35 1/2, set in April. (The shares lost 30 percent of their value in a single day this month after the company announced it had flunked certain software tests to get certification for its cable modem.) And though it won't be profitable in 1999 -- and will earn only seven cents a share in 2000 -- it's expected to grow earnings at a 48% annual clip over the long term (assuming its modem ultimately wins certification). ----------------------------------------------------------- Of course, the story is more favorable to TERN than CMTO as the analyst interviewed covers TERN but not CMTO. Bit unfair but some good press is better than nothing. -Srini