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To: The Ox who wrote (10609)	11/17/1999 4:12:00 PM
From: SJS	Respond to of 14427

AMAT reported: 16:07 [AMAT] APPLIED MATERIALS Q4 NET 77 CENTS VS LOSS 51 CENTS; FIRST CALL 64 CENTS 16:07 [AMAT] APPLIED MATERIALS Q4 CONTINUING OPS. 69 CENTS VS LOSS 45 CENTS I think the expectation was .64!

To: The Ox who wrote (10609)	11/17/1999 4:29:00 PM
From: drsvelte	Read Replies (2) \| Respond to of 14427

Michael..I've traded CMTO several times during last summer with modest success. The stock is lagging seemingly beause they can't get their modems certified (see the Briefing.com note following; although that note has a May date,they again failed certification in September). TERN is a much stronger stock IMO. From Briefing.com.... Revisiting Com21 (CMTO) In a Stock Brief dated 5/7, Briefing.com profiled two small-cap stocks with promise. One of those stocks was Com21 (CMTO 15 7/8). To say that the stock's performance has been disappointing would be an understatement, a gross understatement. CMTO is down 47% over that time frame. Its precipitous decline has not gone unnoticed by a number of you who have emailed us asking for guidance. Here goes. A number of forces have conspired in recent weeks to knock the stuffing out of Com21's stock. They are listed below. Falling cable modem prices: The cable modem business was/is highly competitive, and the recent adoption of industry standards only added to pricing pressures. But declining modem prices aren't new. The key for CMTO is whether or not prices fall faster than costs. That was not the case last quarter when the company managed to post a 400 basis point improvement in gross margins despite a larger percentage of its total sales coming from the lower margin cable-modem business. Problem here is it's easier for investors to detect the drop in prices than it is for them to determine the drop in costs. That said, there is a definite risk to earnings from the steady drop in modem prices; and in a thinly traded stock with little history (went public in May of 1998) such a risk is often reason enough for investors to head for the hills. Doesn't mean they'll be right, but it doesn't do CMTO shareholders much good to be proven right while experiencing a 50% drop in the price of the stock. At least not over the short-term. No Certification: It was announced yesterday that the company's cable modem didn't receive CableLabs' certification. In a business where success is measured in a company's ability to enhance existing products and to develop and introduce, on a timely basis, new products and features that meet changing customer requirements and emerging industry standards, such failures are not easily dismissed. Nevertheless, the company is making significant strides at achieving DOCSIS (Data-Over-Cable Service Interface Specification) certification, and could do so by as early as late August. While the delay in making its modems compliant will certainly translate into additional costs, if the company achieves certification by September any impact on performance will be short-lived and relatively small. Should also be noted that there are no such standards internationally, where company derives a significant percentage of its revenues. Again, not good news for the short-term as the announcement clouded company's earnings picture, but not a material blow to the company's long-term prospects. Competition: Company's tremendous revenue growth is great, but it does have a downside. When bigger companies see upstarts like CMTO growing revenues by nearly 175%, they stand up and take notice of the marketplace. There is a growing concern that companies such as 3Com (COMS), Siemens, or Motorola (MOT) will make a concerted drive at capturing market share. If they do so it will most assuredly add to current pricing pressures. But as we noted in our original Brief, there is also a good chance that any one of the aforementioned companies, not to mention the likes of Cisco (CSCO) and/or Lucent (LU), might just step in and buy CMTO. Given the recent drop in the stock's price, I would think the chances of takeover, while still speculation, have increased materially. While, Briefing.com concedes that these developments cloud the near-term earnings picture, they do not, in our opinion, significantly alter the long-term growth prospects of the company (assumes company's modems become DOCSIS compliant). In two years, CMTO has seen revenues grow from roughly $1 mln to $48 mln. Not long ago, management noted that it was comfortable with estimated FY99 revenues of $86 mln. It's growth like this that resulted in Com21 being named the 4th fastest growing company in Silicon Valley. Others included in the top-ten were Yahoo! (YHOO) e-BAY (EBAY), Excite (now part of ATHM). Not bad company. An exciting product pipeline, alliances with a number of key industry players and a current ratio of better than 12 to 1 suggest that CMTO will live up to its (projected) 5-yr annualized growth rate of 50%. Assuming the company is successful in growing revenues in the current fiscal year to $86 mln, its resulting price to sales (p/s) ratio would be a relatively puny 3.9x. At present, it trades at a very reasonable 4.7x trailing twelve month (ttm) sales. Wouldn't be surprised if company fetched closer to 10x sales in a takeover. That would result in a market cap of $860 mln (using FY99 estimates), or a per share price of 40 3/8. No guarantees mind you, but for a company growing its business at a rate nearly 7x as fast as the overall market, its current p/s ratio is downright cheap. In case you're wondering, the company is projected to lose $0.35 in FY99, but turn marginally profitable in FY00 with estimated earnings of $0.19. (Note: 60-days ago company was expected to lose $0.41 in FY99 and gain $0.16 in FY00.) Stocks that get creamed on big volume such as CMTO did yesterday rarely snap back overnight. It can take months of sideways trading to work off the overhead supply and restore confidence. So, barring a takeover, the stock is likely to continue underperforming over the near-term. But we still think CMTO is a quality company in a fast-growing business (Forrester predicts that by 2002, 60 million U.S. homes will be online. Sixteen million of online homes will have high-speed access, and 13 million of those will enjoy connectivity over cable for the "last mile." Outside the U.S., high-speed online users will total an additional 24 million.) whose stock will rise again. It just might take 6- to 12-months. Robert Walberg 07-May-99