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Technology Stocks : Ascend Communications-News Only!!! (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Gary Korn who wrote (563)	11/18/1997 11:53:00 AM
From: Sector Investor	Read Replies (1) \| Respond to of 1629

Synopsis of an update on ASND From H&Q: H&Q says they they believe that Japanese sales will continue to remain soft in the December quarter, and that they expect sales from Europe will also continue to be weak but stronger than the December quarter. H&Q expects that most of the product feature/function issues will be resolved by the end of 1997 and that Ascend will be well positioned for improved sales growth in its access concentrator business during the March '98 quarter. H&Q believes that (CSCC's switching) sales continue to rebound as service providers emphasize building-out their ATM backbones. They feel that the strength in ATM sales should continue to buffer the expected weakness in frame relay sales. H&Q thinks that during the December quarter, ASND will realize a significant portion of its business from UUNET. H&Q comments that although the near-term outlook remains murky, the "elucidation" of the Company's mid-to-longer term outlook appears to be more favorable than most investors have believed in most recent weeks, and they are maintaining our BUY recommendation on Ascend. ****************************************************************** Sector's comment: Duh! I guess people on SI are not "most investors"! ****************************************************************** H&Q says that based on their conversations with key members of management, suppliers and customers, they expect ASND's revenue for the December quarter to be in-line with their expectations. They state that over the past several weeks ASND stock has remained under considerable pressure. Recently, they have surveyed several of their industry contacts and ASND's largest customers. From this analysis they think that while it appears that management is continuing to implement its programs to effect a resurrection of the Company's revenue and earnings growth to its more historical patterns, several issues remain unresolved to date. Regarding Japan: H&Q believes that the overall weakening of the Japanese economy has contributed to some businesses reassessing their near-term expenditure patterns. They also say that their sources indicate that ASND still needs to refine some technical issues concerning the feature and function set of the MAX-TNT. H&Q also thinks that as service providers work through their current inventory of deployed ports, the speed of the Japanese Internet infrastructure build-out remains somewhat slower than was initially expected. Regarding Asia: H&Q says that it appears that Asian sales outside of Japan will also remain soft largely due to recent the weakening economic environment throughout the region, but that they believe that switching sales will continue to ramp throughout the quarter. Regarding Europe: H&Q expects sales from Europe continue to be relatively weak throughout the December quarter, but should be up sequentially from the September quarter's level of $ 27 million. H&Q says ASND continues to work towards resolving its technical problems with the MAX-TNT in Europe and will be resolved by the end of 1997 leaving ASND well positioned for improved sales growth in its access concentrator business during the March '98 quarter. H&Q believes that the most important dynamic to watch over the next quarter will be the actual level of European user demand and the overall competitiveness of 3Com within the European market. H&Q will be looking closely at the features/functions that ASND will be able to add to the TNT in order to satisfy this user demand. H&Q expects the aggregate of the international sales to be relatively flat from last quarter -- in the $75 million range. H&Q thinks that some late September quarter frame relay equipment sales that were actually booked during the December quarter, may further assist in the reviving the revenue and earnings contribution expected from this business. H&Q cautions that the switching business' will be entering its traditionally weak quarter (March). They believe that this weakness will be largely caused by the service providers' lengthy budgeting process. H&Q thinks that over the past few quarters ASND's competition has been catching up with some of ASND's features, functions and port densities. H&Q believes that management is aggressively seeking to restore ASND's product dominance via the introduction of new products. They are expecting the ASND to announce a much denser version of the MAX access server sometime during the March quarter, and they think that this March quarter enhancement will use Rockwell new CSM3 technology which will allow ASND to place 3 modems within a single set, effectively tripling the capacity of the MAX TNT product and allowing for a full 672 port density within a single TNT chassis. H&Q also expects that later in 1998, most likely toward the end of the second quarter, ASND will announce an entirely new access concentrator platform that will achieve even higher densities. H&Q maintains their BUY recommendation on ASND, stating that they believe that nearly all of the negative information relating to this story is already reflected in the stock's price, which, currently trading at 20X their revised $1.20 EPS estimate, cannot be called expensive, considering the valuations that currently exist within this sector. H&Q believes that ASND's price is inexpensive considering the strong possibility that ASND management most likely remains conservative with its forecasts considering the substantial criticism directed at them most recently.