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Technology Stocks : Aware, Inc. - Hot or cold IPO? -- Ignore unavailable to you. Want to Upgrade?

To: Tim McCormick who wrote (2288)	1/6/1998 12:00:00 PM
From: SteveG	Read Replies (1) \| Respond to of 9236

On request- the salient Aware sections from H&Q sector report (which were superceded by later upgrade comments, appended at end): Aware is expected to report on 1/11 at 1:00 PM Est. Revenues: $0.840M Est EPS: $-(0.11) Current rating: Hold (Upgraded yesterday to Buy) AWRE appears to be on-plan to post an in-line December quarter. Our estimates are for a loss of ($0.11) EPS on revenue of $840 thousand in revenue. As expected, the company is continuing with its plans to invest heavily in R&D, and Sales and Marketing throughout FY97 in order to gain a competitive advantage as ADSL deployment begins in late 1998 or 1999. The Company continues to add to its list of significant design wins. We believe that this ADSL chipset provider will be in a strong position to take advantage of the accelerating growth expected in the xDSL equipment market beginning in late 1998 and into 1999. We expect that Aware will continue to sign new strategic partnership agreements in 1998. Further, we expect the Company to benefit from its partnership with DIGI in providing its DWMT (Discrete Wavelet Multitone) modems to the HFC market. We feel that we may continue to see appreciation in the stock as these new agreements are inked; however, in our opinion service providers continue to have little incentive to announce their ADSL deployments plans until the late FY98/ early FY99 timeframe. We reiterate our HOLD recommendation of AWRE. ========= Post sector report upgrade comments: * We are changing our recommendation on Aware (AWRE) from a HOLD to a trading BUY. * AWRE plans to unveil their new splitter-less DMT ADSL technology, allowing the telcos to deploy ADSL services to consumers without sending a technician to the customer's location, later this week. * It is starting to be widely rumored within the telecom industry that Microsoft, Intel and Compaq are working together with several RBOC's to promote ADSL technology. * Aware's splitter-less ADSL technology may be part of a joint announcement between these partners during the February timeframe. * While we continue to believe that deployment of a viable ADSL product offering may continue to remain quite a way off. * However, we believe that announcement related trading activity is likely to cause shares of AWRE to trade higher throughout the January and February timeframe. Estimates Q1 Q2 Q3 Q4 FY `97 EPS (0.01)A (0.01)A (0.11)E (0.11)E (0.25)E `97 Revenues 1.80A 1.87A 0.723E 0.840E 5.23E `98 EPS 0.02E 0.02E 0.03E 0.03E 0.10E `98 Revenues 1.01E 1.21E 1.45E 1.74E 5.41E 52 week Price Range: $8.50-16.88 Current Book Value: $1.94 /sh Revenue(F1996): $5.3 mil P/E FY97: NM Cash per Share: $1.44 /sh Shares Outstanding: 19.6 mil F98Y/Y EPS growth: 140.9% DSO 103 Market Cap: $205.6 mil Aware, Inc. is a worldwide leader in xDSL technology development. The Company's products that enable new broadband services over the existing telephone network. Aware's products include xDSL technology, software, development platforms, modules and modems for high- speed, interactive broadband network applications. We are upgrading shares of Aware, Inc. from a HOLD recommendation to a trading BUY recommendation for the following reasons: ú Later this week, at an analyst meeting in Boston, AWRE plans to unveil their new splitter-less DMT ADSL technology. This technology will allow the telcos to deploy ADSL services to consumers without sending a technician to the customer's location. Theoretically, this new technology be deployed as described; however,we are still not convinced that this technology will actually be able to deliver upon the entirety of its claims or the level of the telcos interest in actually deploying something new and innovative. ú Additionally, it is starting to be widely rumored within the telecom industry that Microsoft, Intel and Compaq are working together with several RBOC's to promote ADSL technology and that Aware's splitter-less ADSL technology may be part of a joint announcement between these partners during the February timeframe. ú While we continue to believe that deployment of a viable ADSL product offering may continue to remain quite a way off; we, nevertheless, believe that announcement related trading activity is likely to cause shares of AWRE to trade higher throughout the January and February timeframe. ú We also believe that AWRE is undervalued from a take-over perspective. Amati (AMTX) was recently purchased by Texas Instruments for approximately $400 million. AWRE, possessing similar technologies, is currently valued at just over $200 million. In addition, we have rarely seen shares of AWRE trade below $9.50, and therefore, we believe that downside risk is somewhat insulated. ú Thus, we are upgrading shares of AWRE from HOLD to trading BUY. ==================