To: Logain Ablar who wrote (1158 ) 5/17/2000 2:49:00 PM From: Blue On Black Respond to
From Briefing.ComWestell Technologies (WSTL)25 1/4 +1 1/16: Okay, full disclosure -- we liked this stock in March at $37, and if you bought then you'd be down 47%. We really like it now, and we mean it this time. March was the peak of the tech rally and if you bought any speculative techs in March, you're probably underwater on the position and wondering whether to take your loss or wait for the comeback. Westell is a candidate for a comeback. The issue trades more than 1.3 mln shares per day on a float of 33 mln and is scheduled to release Q4 results Thursday after the close. A strong Q4 release should provide a catalyst for WSTL shares. Demand for DSL customer premises equipment (CPE) continues to accelerate and Westell sells to such big service providers as Bell Atlantic (BEL),British Telecom (BTY) and SBC Communications (SBC), all of which are rolling out DSL services at a frantic pace to compete with the cable ISPs. A key announcement came on March 27 when Westell annouced an expanded alliance with Fujitsu Telecom Europe Limited. The deal will facilitate Fujitsu's DSL rollout in Europe and Westell will provide the equipment, licensing and R&D -- it could lead to further agreements with Fujitsu, which has a strong presence in Asia. Here's what to look for in Thursday's release: EPS consensus estimate is a loss of $0.03 and strangely, of the eight analysts covering the stock, all of them are predicting a loss of $0.03. On the revenue front, WSTL will report an equipment revenue line item and a services line. For equipment revenues, we see $30 mln as the crucial hurdle, this would represent a 37% sequential and 72% annual increase; upside is possible; falling short of $30 mln would be disappointing. On the service side, look for $9 mln as a benchmark. Total revenues of $39 mln would represent a 30% sequential increase and a 62% Y/Y jump. Profitability is expected in Q2 of FY01 (September 2000), but could come earlier if: a) WSTL customers can make progress in meeting DSL service demand or b) Westell's wholly-owned subsidiary, Conference Plus (aka CPI), continues their successful transformation to the Application Service Provider (ASP) model ahead of schedule. If CPI can achieve top-line growth in the 45% neighborhood, WSTL will successfully boost their higher margin services business as a percentage of total revenue. Also, because CPI operates as a separate entity with an independent management team, WSTL could unlock significant shareholder value by opting to spin-off the unit sometime in the future. - Matt Gould, Briefing.com
