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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: Riley who wrote (72053)	11/11/1999 11:41:00 PM
From: Riley	Respond to of 90042

Part Two to follow: And then there's the new management. "They totally changed the business model," says William Becklean, an analyst at SunTrust Equitable Securities, who rates the company a Strong Buy and has a price target of 30. "Now, they have some excellent products that will result in some competitive wins that should show up in earnings and eventually in the stock price." Moreover, some analysts like Chris Stix of S.G. Cowen think Cabletron could be a takeover target. As one of only a few unattached smaller data networking companies, and with a relatively modest market capitalization of $3.3 billion, the company might attract some interest from a company that wants easy access to its markets. For all these reasons, Cabletron stock has more than tripled, from its low of 7 1/4 in April to a recent 52-week high of 22, for a P/E (at current prices) of 61x estimated earnings of 34 cents a share for the fiscal year ending February 2000. That's a hefty premium to its 20% long-term earnings growth rate. But Cabletron's P/E of 32x the 66 cents it is expected to earn in 2001 is a nice discount to the 94% earnings growth rate it's expected to show that year --and to its peer group's average of 66x 2000 calendar-year estimates. Zankel also thinks Cabletron's stock is selling for less than its asset value. "The sum of the pieces is worth a whole lot more than the whole," he claims. "Services is doing $225 million-plus in revenue, the software business that they [will] spin off is worth $5 a share, and the DSL business is worth $5 a share." There are risks, of course. Cisco is a formidable rival, and so are other competitors. And Cabletron needs to execute -- big time -- in an area it's been traditionally weak: sales and marketing. But more and more pros expect that to happen, simply because they say Cabletron's finally got the goods -- technology, management and pricing -- to maintain its edge. --------------------------------------------------------------------------------