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

To: blankmind who wrote (735)	12/11/1997 2:03:00 PM
From: Sector Investor	Respond to of 1629

From ING Barings: Datacraft Asia yesterday announced that it would acquire a 100% interest in UCS Communications, a Hong Kong-based data communications systems integration company. ING states that UCS Communications is in a similar business to that of Datacraft Asia and is incorporated in Hong Kong. ING says that UCS derives most of its revenues from China through a network of offices in Beijing, Shanghai, Shenyang, and Shenzhen. UCS sources its equipment from a variety of vendors including Ascend Communications which is also a supplier to Datacraft Asia. ING says that according to UCS management they have gained a substantial market share of China's Internet dial-up access market and its customers include the telecom authorities in the Chengdu, Fujian, Guangdong, Kunming, Shandong, and Zhejiang provinces. UCS has 25 employees in total.

To: blankmind who wrote (735)	12/11/1997 2:15:00 PM
From: Sector Investor	Respond to of 1629

Synopsis from UBS - ASND: LOWERING FRAME RELAY PRICE PER PORT UBS says the for the 9000 frame relay switch, Ascend's new channelized DS3 module down to the DS0 level brings the price per DS0 port down to about $100. Previously, the price had been over $200 per DS0. They comment that they had written several times in the past few months that frame relay equipment pricing was to dramatically fall in 1998, and that this is the first public confirmation of this from embedded frame relay equipment suppliers. UBS expects start-up companies and some public companies that currently do not participate in the frame relay equipment market to release new products with price points under $75 this year, so they would expect potential further declines in 1998. UBS adds that the new announced density and pricing from ASND suggests that they are aiming to keep their market share in frame relay and not let price be a reason to lose business. UBS also says that they believe the new channelized DS3 module was perhaps a reason behind the recent weakness in NN, as they believe that Newbridge does not have a DS0 channelized DS3 functionality on its 36170 switch, until maybe in 1998. UBS says that for both ASND and NN, the new significant lower price points in frame relay in 1998 will impact frame relay equipment revenue growth. However UBS mentions that since these price reductions are being stimulated by advances in technology, they probably will not impact margins materially. Per UBS estimates ASND gets 25% of total revenues from frame relay equipment and NN gets 15%. CSCO and NT derive less than 5% overall revenues from frame relay equipment. UBS maintains hold

To: blankmind who wrote (735)	12/11/1997 2:44:00 PM
From: Sector Investor	Respond to of 1629

Synopsis from DLJ: 4Q Looks In-Line No rating change. DLJ says that in their recent meeting with ASND management they learned that the fourth quarter appears to be on track, although back-end loaded. [Sector sez thats news to him] DLJ adds that ASND is comfortable with consensus expectations for 1998 at the $1.45 billion revenue mark and $1.20 EPS. DLJ adds that the relatively strong showing for the quarter, is being driven by some large orders from major customers, having passed standards testing in most European countries, and strong ATM business. Regarding Asia, DLJ says it again appears to be very weak, Japan in particular. Continued pricing pressure, offset in part by reduced manufacturing and component costs, could squeeze gross margins by 1% in 1998. DLJ mentions that CSCC's next generation ATM switch, the 550, is currently in beta trials and the ASND sees production shipments and revenue recognition in the first quarter. DLJ says they are beginning to see some merger synergies working, specifically some early business in North American carriers for ASND through CSCC channels as well as international opportunities for CSCC through ASND channels. Interestingly, DLJ comments that ASND recognizes the potential of Layer 4 switching technology, and that a move into this area will be necessary. DLJ thinks ASND could develop internally but the most likely route would be through acquisition. DLJ mentions two start-ups in this area, Xedia and Packeteer, as being the most likely candidates. [Anyone know if they are public?] DLJ believes that expectations for an in-line or slightly better 4Q are already discounted in the stock which ran up 30% in two days last week. DLJ thinks that visibility on the first quarter is much less than the fourth quarter, even with ASND's comments. Regarding fourth Quarter Outlook, DLJ says that North America has been strong across all product lines, including remote access and core switching. They think that the carriers are spending the remainder of their budgets going into the end of the fiscal year. Also, DLJ says a very large deal with UUNet that was announced in the third quarter is being filled this quarter. DJL adds that Europe has been relatively strong in Q4 and Asia continues to be weak, Japan in particular. Regarding products, DLJ says that the ATM business has been the strongest. In 1998 ASND sees moderate growth in both frame relay and access concentrators, with ATM growing more significantly. Regarding 1998: DLJ says that ASND sees aggressive street price discounting continuing to result in an estimated 20% industry revenue growth. In RAS ASND estimates modest industry growth in the 15%-20% range with projected gross margin declines in 1998 to the 63% level from the current 64%, due to pricing pressures, partially offset by better component pricing and cost reduced manufacturing. DLJ says that the CSCC 550 is currently in beta and should ship in production volume during Q1, and ASND believes that the transition to the 550 will be smooth, with the 550 positioned as a high-end core switch. The 550 has actually helped sell the 500, rather than cause purchase delays. DLJ comments that while ASND has expressed comfort with 1998 estimates they think that visibility by quarter is significantly less than it has historically been for Ascend. In the words of CFO Michael Ashby the company has transitioned from "hyper growth to managed growth", and DLJ thinks that going forward, each quarter will have to be won through solid execution on a daily and weekly basis without the large backlog "back stop" that the company has enjoyed in the past. Regarding the merger, DLJ comments that ASND is beginning to see some signs of synergies, mentioning the North American carrier business for Ascend and international opportunities for the Cascade business. They add that the carrier opportunities for Ascend have come easier than the international opportunities for Cascade as ASND faced greater obstacles integrating the sales forces internationally. They lost a lot of Cascade people. Until very recently, the international sales offices did not have Cascade demonstration equipment on site. DLJ comments that training has also been an issue, with staff training to be completed by the end of this quarter, and that the merger also appears to have taken a toll on Ascend's engineering efforts, adding that ASND experienced greater than normal attrition in the Cascade engineering staffs,losing many engineers to start-ups in Massachusetts and the Valley, as well as to Cisco. ASND had not added to its engineering staff for the 10 months prior to the third quarter, which hurt in the customization of the TNT for large customers.. But now hiring has begun and ASND plans to ramp up for the next few months.