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

To: Bald Eagle who wrote (26480)	12/5/1997 5:31:00 PM
From: HEXonX	Respond to of 61433

Wiseowl, here is what the link said and it does work. Bill Schaff Model P Ground Rules Model P Table Schaff's Bio Archive of Schaff's Columns The Model P Retailing Powerhouse CUC International A Good Buy Mon., Dec. 1, 1997 After having stuffed myself once again, I'm attempting to write this column form a horizontal position -- without much success. After being bombarded by the post-Thanksgiving retail blitz, I started thinking of all the retail-related technology stocks. After all, we're in the countdown days until Christmas and Hanukkah. I'm thinking beyond the pure technology stocks devoted to electronic commerce technology, commerce security, and multimedia applications. I'm moving beyond pure technology consumer product companies such as PC makers, digital cameras, and the like. I'm talking back-to-retail basics -- companies that are great at brainwashing the masses to buy and consume more merchandise and goods than they can possibly use at very profitable prices (think Coca-Cola and Nike). I would add CUC International [CU], soon to be Cendant, to the short list. The company reports this Wednesday. CUC continues to meet expectations -- it's likely to hit its fiscal third quarter earnings, ending Oct. 31, at a consensus of $0.23 based on a 25 percent to 30 percent forecasted growth rate. The company should close on the HFS merger by year end, eliminating a lot of arbitrage activity. The calendar 1998 earnings estimate ranges around $1.26 to $1.30 or roughly 22 times at $29 per share. Why do I like this company so much? Because it cross-sells like crazy amongst its various membership group organizations. The membership roll contains more than 70 million members. The company also has a substantial product line to cross-sell, including educational and tax software, and it generates a recurring revenue stream that's the envy of the retailing industry. We're talking cash-flow margins in excess of 30 percent with very little foreign currency exposure. Acquisitions will continue to drive its growth supported by strong free cash flow of about $1 billion per year. The biggest concern I have is whether or not Silverman and Forbes will work well together. Another area of concern is whether membership growth can continue to expand at prior high rates. However, they are not all members of the same club. HFS shareholders will get 2.4013 shares of CU per share of HFS and will create Cendant [CD]. There's not much arbitrage left in the deal, but you do get a slight discount buying HFS today. If you have at least a one-year holding period, this is a good one to tuck away. Questions & Answers: : For the past year, I have averaged down into Ascend [ASND] and 3Com [COMS]. I have added Lucent [LU] and Tellabs [TLAB]. Both my telecom equipment holdings and networking holdings are going nowhere in particular. ASND/COMS are in the doghouse compared with last January. Do you see any improvement in ASND/COMS stock performance? LU and TLAB both handily beat estimates. Has this sector cooled, and if not, what is holding them back? : Sorry to say that of the four names, only LU and TLAB would be on my ownership list today. First, ASND is finding market share gains very tough. In a market share study release for the third quarter, ASND' access concentrator sales were $453 million, down 3 percent sequentially (according to the Dell 'Oro Group). Total industry sales increase of 26 percent year over year. 3Com gained the most by increasing market share 8 percent, while Ascend lost the same amount, dropping to 29 percent market share. Cisco gained 1 percent to 15 percent, and Bay was flat at 1 percent. It is likely that Ascend's market share decline will stabilize during the next six months, but the competition is hitting them both at the market share level and the ASP level. International customers, the real growth engine for Ascend, has slowed down tremendously. Meanwhile, 3Com and Cisco are taking advantage. Ascend is a value play, but it's struggling at the business level as well as the management level. People seem to be leaving the company in droves. Not the best environment. 3Com is making inroads at many levels, but U.S. Robotics and adapter card sales have essentially become commodities with very little product differentiation. Analysts have dropped the heck out of estimates and are around the $1.85 area for fiscal 1998 (18.4X). They have to get channel inventory for NIC cards and modems down. Expect slower sales for fiscal second quarter and third quarter. Consumer demand for holidays will be important. I expect that inventory issues will probably subside in about three months. New products in networking are a positive. TLAB was pricey to begin with, but at least the company's business keeps going in the right direction. The fourth quarter is going slightly above plan in a seasonally strong quarter. Ericcson has been buying, which is a great endorsement. Expect some upside surprise in 4Q eannings per share. Lucent is the big winner and is likely to remain so for a while. HEX