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

To: Skeeter Bug who wrote (24271)	11/21/1997 2:27:00 PM
From: Larry J.	Read Replies (4) \| Respond to of 61433

<<Wallstreet has a very short memory. You watch this baby fly when ASND beats the estimate by 25-30% this quarter>> <<larry, do you really think that this is possible?>> Absolutely, and since I'm fond of beating up bears and shorts on this thread for offering no argument to support statements of this type, I will offer my argument as to why I feel that this will occur. What I am suggesting is a 25-30 % upside surprise. I am basing this on the current First Call estimate of .23 per share, and $290M in revenue. My forecast, then, is .29 (26% surprise) - .30 (30%) per share on revenues of $305 - $310M. Why: 1. Bernie Schneider (Treasurer) and Michael Ashby (CFO) have both confirmed that they are comfortable with the estimate one month into the quarter. They would not make this statement if the backlog was not already in place. Since they cannot afford to miss, there is probably a "sandbag" factor that I would place @ about $5- 10 M or 01 - .02 per share. 2. Networkers in general depend on a fairly significant percentage of their revenue to be booked and shipped during the same quarter "turns business". ASND is no exception, they will get their share. This revenue would be in addition to the above numbers. $10 - $15 million is a reasonable assumption here. We already know that growing from 270M (Q3 A) - 290M resulted in .03 per share (.20 Q3A - .23Q4E). Therefore, @ 310M revenue, add .03 per share. 3. Q4 is historically ASND's strongest quarter of the year. 4. Once it was clear that there was going to be a revenue and earnings shortfall in Q 3, they would only have shipped enough product to make the revised numbers (which they did, at the high end ). Shipments that could have gone either way were saved for Q4. This is confirmed in that Oct. revenue was strong, and that Schneider indicated that the quarter was not back-end loaded. 5. 56K issues cited as a contributing factor to Q3 shortfall have been resolved. 6. The ASND / CSCC merger is largely complete. ASND will begin to enjoy economies of scale in the form of eliminating redundancies in operations, and increased efficiencies. Combined purchasing power is substantially greater resulting in reduced component costs and offsetting margin hits in remote access. Existing component inventory and associated carrying costs should be less in Q4 than in Q3, as the burden has been shifted to the contract manufacturers and distributors. I'm adding .02 per share for these factors. 7. As coined by Addi, the "Persian Factor". Mory feels that ASND has been unfairly punished for 1 bad quarter following 12 consecutive quarters of sequential revenue and earnings growth. ASND's multiple (PE) is amongst the lowest of all networkers (only CS is lower). ASND mngt. wants to prove the street wrong by blowing out the numbers. 8. I'm an optimist. In summary, we have .23 confirmed, .01-.02 "padding", .03 for revenue increase, and .02 in cost reductions. Beating street estimates by .06 - .07, or 25 - 30%. Larry