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

To: Roadkill who wrote (32241)	1/27/1998 9:34:00 PM
From: Gary Korn	Respond to of 61433

I think ASND will trade generally between 28 and 32 for the next few months, barring substantial news or a bear market. As you note, the projected 9% EPS growth rate for 1998 didn't exactly thrill the Street, and neither should it. Nonetheless, this is a year of gross margin adjustment. Revenues will grow 20-25%+, but EPS will lag considerably. Once margins adjust (by 1999, hopefully), the EPS growth should closely track the predicted 20-30% annual revenue growth, and the longs will be back in business. If ASND can compound that revenue growth with a future readjustment to historic gross margins (GX 550, etc.), we could have some substantial upward earnings surprises. By the end of '98, I'm hoping that the stock may begin to push $40-45. Unfortunately, that's right when the LU prohibition on stock acquisitions ends, and ASND may get scooped up by LU for $45-55/share in LU stock. This would actually be a bad result for the ASND longs, because 1999 could have a huge upside for ASND, with the focus on the core-switching business and the increased high-margin service business. Oh well. All just MHO, of course. Matt, your humble opinion looks pretty insightful to me. The question, given this unstable market, is how to play the waiting game (if one is to play at all). I don't believe in put protection. Perhaps better to spread, to some degree, into other stocks during the near term period, then reenter when ASND indicates that it can show some strength (rather than hang on as ASND moves up and down in a small trading range). Again, I'm beginning to question the concept of hanging on while waiting for some surprise announcement, though I do think surprises are out there (including negative market surprises generally). I'm not advocating moving out of ASND in toto, but as I said, I'm wondering if it is the best place to park significant capital during February. Gary Korn