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Technology Stocks : Westell WSTL -- Ignore unavailable to you. Want to Upgrade?

To: Czechsinthemail who wrote (19893)	8/7/2000 3:02:28 PM
From: Sir Auric Goldfinger	Read Replies (3) \| Respond to of 21342

Buy the pig!: "WSTL: STOCK WEAKNESS APPEARS TO BE OVERREACTION TO NEAR-TERM PROSPECTS BAIRD/ BAIRD/ BAIRD/ BAIRD/ BAIRD/ BAIRD/ BAIRD/ Westell Technologies, Inc. August 3, 2000 WSTL: STOCK WEAKNESS APPEARS TO BE OVERREACTION TO NEAR-TERM PROSPECTS 52 Week Fiscal ------ EPS ------ P/E Ratio Shares Price* Range Year 1999 2000 2001E 2000 2001E Div Yield (Mils) 18.44 41-6 MAR ($0.94)A ($0.23)A $0.30 NM 61.5 0.00 0.0 62.6 Prior Day's Close Current Rating Rating: Strong Buy S&P 500: 1,438.70 Suitability: Higher Risk Price Target: $48 Westell's stock price has been under pressure the past several days. * Weakness is due in part to the overall technology market, but also due to prospective concerns over DSL deployment logistics with RBOC customers. * Currently, there is no firm evidence of any DSL deployment problems with any Westell customers, but Westell does have high dependence on several key customers. * DSL demand remains very strong among Westell's customer base. * It is too early in the quarter to make any projection regarding revenue forecasts, but no major changes in guidance is anticipated regarding revenue and none regarding earnings. * We believe that Westell remains one of the best vehicles for investing in DSL local-loop access and that current valuation represents an overreaction to near-term transitory issues regarding sequential revenue growth in the quarter, which may or may not occur. * Accordingly, we are maintaining our current estimate and outlook and Strong Buy recommendation and would use the current weakness to accumulate Westell shares. Summary Besides overall weakness in the technology market, the recent decline in Westell shares reflects some concern over DSL deployment issues in the carrier market. Westell now has 30 customers for its DSL modems in the last quarter, but among these, there are only four which represent any major significance: British Telecom, Bell Atlantic, SBC and recently announced GTE. Of these four, SBC - representing the combination of three RBOCs - is potentially the largest. Each of these customers is expected to experience significant demand for DSL products over the next four quarters, but prospective concerns over deployment logistics may create non-linear growth. DSL subscriber growth among Westell's customer base was strong in the last quarter. For example, with SBC, the number of customers more than doubled over the first quarter and the number of lines installed at the end of the quarter reached nearly 400,000. SBC's order backlog at the end of the quarter was more than 40,000 lines, and additional promotional initiatives, including aggressively marketing of DSL in the Ameritech service area, are expected to sustain growth in this quarter and going forward. SBC currently does not appear to be experiencing any unusual delays in its DSL deployments, but SBC also indicated in its second-quarter overview that transitioning to a new system and ordering process, central office hardware availability, some delays in regulatory approvals are factors in deployment to meet the high demand. Bell Atlantic has gone through similar transitions. Westell's carrier customers seem to always have provisionary issues in each quarter but, nonetheless, Westell has reported several strong quarters. Currently, Westell is experiencing no change in its current business and is not changing any guidance regarding its quarterly outlook. Westell also believes that if there are any revenue issues, potentially involving its largest customers, that earnings estimates are still valid since any pushout of DSL CPE revenue is low-margin business. Westell also believes any prospective revenue deferrals will be recovered in Q4. Accordingly, there is no change in the earnings outlook for Westell despite any prospective revenue issue in this quarter, which currently is not evident in Westell's business. Additionally, other vendors are not indicating any current deployment issues. We are, therefore, not changing our recommendation or outlook on Westell and believe any revenue issues are transitory and will not lead to any earnings shortfall in the quarter. Our current estimate calls for another strong quarter and sequential growth for Westell. Consequently, we continue to believe Westell represents one of the best vehicles for participating in DSL local Internet access, that Westell has the most competitive product on the market and its technology capability will leverage new-product initiatives and improving margins over the next year and beyond. Accordingly, we maintain our Strong Buy rating.