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

To: lsgs97 who wrote (2132)	5/17/2000 12:53:00 PM
From: Kerry Lee	Read Replies (1) \| Respond to of 2347

So if I understand what you are saying, CSFB says SELL ( aka "Neutral" ) because some equipment shortage will lead to CMTO missing the Street estimates? Are you referring to topline sales growth OR component shortages impacting gross margins? Pls feel free to add some color to your comments. Also, thanks for taking the time to share some information on CMTO fundamentals. Very refreshing.

To: lsgs97 who wrote (2132)	5/17/2000 3:20:00 PM
From: pat mudge	Respond to of 2347

I've located the CSFB report and it's being faxed as we speak. I know the component shortages are specific to the OEM modems from TurboNet and impact companies across the board, not just CMTO. I'll post as soon as I get the report typed. Pat

To: lsgs97 who wrote (2132)	5/17/2000 3:30:00 PM
From: pat mudge	Respond to of 2347

Com21 Q2:00 Update: Demand Remains Very Strong, Upside Surprise Gated by Component Constraints * Demand for cable modems continues to exceed expectations; However, component constraints will limit upside to our Q2:00 revenue estimate of $53.8M; Lower sales of DOCSIS modems as a % of revenue could have a positive impact on gross margins in the qtr relative to our 27% projection and lead to a smaller EPS loss vs. our $0.16) estimate. * We would note that the component shortages cited above are specific to CMTO's OEM cable modem partner (TurboNet) and relate to the availability of DOCSIS PHY chipsets (not being sourced from BRCM); In addition, long lead times have limited CMTO's ability to ramp production of its own DOCSIS mopdems during the quarter to meet higher than anticipated demand. * Overall, we do not view this as a long-term concern, rather a short-term issue that will result in a more back-end loaded quarter compared to prior periods; We therefore expect CMTO will exit the quarter with a strong backlog. * Anticipate demand for cable modems will remain robust for the foreseeable future as virtually every cable operator has accelerated deployments and upwardly revised subscriber targets to meet strong enduser demand and maintain a first-mover advantage over xDSL providers. * Separately, the company's DOCSIS CMTS and cost reduced DOCSIS modem remain on track for a late Q3:00 introduction;

To: lsgs97 who wrote (2132)	5/17/2000 3:52:00 PM
From: pat mudge	Read Replies (1) \| Respond to of 2347

CSFB report, continued: Demand for broadband access over cable remains extremely robust, with virtually every cable operator accelerating plant upgrades/rebuilds and deployments of cable modems and digital set tops as well as boosting subscriber targets. In addition, North American cable MSO's accelerated transition from proprietary systems combined with strong end-user fundamentals has led to higher than anticipated demand for DOCSIS modems. However, as we noted in our Wireline Update dated May 12, 2000 these very strong top-line fundamentals for our group of telecom equipment stocks leveraged to this market may be gated by potential supply chain constraints. In particular, component shortages, including flash memory, tuners and capacitors, have remained an issue for the industry for the last two quarters. In the case of Com21, we believe component constraints will limit the potential for upside to our Q2:00 revenue estimate of $53.8 million. However, lower sales of DOCSIS modems as a percentage of total revenue combined with a relatively benign pricing environment could have a positive impact on gross profit margins during the quarter relative to our 27% projection and lead to a smaller earnings per share loss versus our $(0.16) estimate. During Q1:00, cable modem shipments accounted for 85% of the company's total sales, with DOCSIS modems representing 32% of the cable modem mix. The company currently offers several DOCSIS certified cable modems, two fo which it OEMs from TurboNet Communications (DOXport 111 and DOXport 101) and one that was developed in-house (DOXport 1010). Although Com21 management previously indicated that TurboNet was component constrained entering Q2:00 and therefore expected the DOXport 1010 to account for a larger percentage of total DOCSIS modem shipments during the quarter compared to Q1:00, TurboNet's ability to meet Com21's very strong demand continues to be constrained by component shortages, particularly DOCSIS PHY chipsets (we would not that these chipsets are not sourced from Broadcom). In addition, long lead times (13 weeks for key components) have limited Com21's ability to ramp production of its own DOCSIS modems during the quarter to meet higher than anticipated demand. Overall, we do not view this as a long-term concern, rather a short-term issue that will result in a more back-end loaded quarter for the company relative to prior periods. We therefore expect Com21 to exit the second quarter with a very strong backlog (by our calculations the company's book to bill ratio was in excess of 1.4 at the end of Q1:00). In fact, we believe that if not for these constraints the company's top-line results would significantly exceed our estimates. In addition, we do not believe these issues are specific to Com21 as our conversations with other cable modem vendors and component suppliers during last week's NCTA 2000 cable show confirmed sustained component constraints and long lead times. Therefore, we do not anticipate any market share shifts to occur as most vendors continue to have difficulty in meeting cable operator demand. Finally, we believe the market for cable modems will remain robust for the foreseeable future as cable operators strive to meet strong end-user fundamentals and maintain their first mover advantage over xDSL providers. Separately, Com21's DOCSIS CMTS and cost-reduced DOCSIS cable modem (based on Broadcom's BCM3350 chip) are on track for introduction during late Q3:00. Qualification testing for the DOCSIS CMTS at CableLabs is slated to begin this summer, with initial revenue contribution anticipated in Q4:00.