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

To: Narotham Reddy who wrote (43932)	4/13/1998 8:43:00 AM
From: Wayners	Respond to of 61433

I've seen a lot of trades go through at $40 and $39 7/8---Firm Trades on Quote.com at 8:40 a.m EDT. All bids and asks right around $40 even.

To: Narotham Reddy who wrote (43932)	4/13/1998 8:45:00 AM
From: Jack Colton	Respond to of 61433

CNN FN report ASND is "One of the Companies we're watching" and the ASND reported 26 cents a share earnings... One penny better than expected. At 8:44 - 56000 shares preopening trades pending

To: Narotham Reddy who wrote (43932)	4/13/1998 8:46:00 AM
From: jim detwiler	Read Replies (1) \| Respond to of 61433

Some breakdown for the quarter Surprisingly, the strength in the quarter was primarily from the Remote Access and Enterprise Access product lines which each grew roughly 8% sequentially. Both of these product lines benefitted from stable pricing and solid end-user demand in the quarter. The core switching product lines which grew over 24% sequentially in the December quarter grew by only 1% sequentially in the first quarter. While this number is somewhat lower than expected, bookings for core switching in the quarter were very strong, and visibility into June is excellent.ú Accounts receivable DSOs were roughly flat sequentially at 72 days, and are within the company's model of 70-75 days. Ascend's inventories showed some improvement, but were also roughly flat in the quarter at 84 days. The continued high inventory levels were due in part to demo units shipped in the quarter; management commented that they expect inventory levels to decrease in the June quarter. The company's financial performance, as measured by its ROIC, continued its modest upward trend indicating the positive business trends at Ascend. úSurprisingly, the strength in the quarter was primarily from the Remote Access and Enterprise Access product lines which each grew roughly 8% sequentially. Both of these product lines benefitted from stable pricing and solid end-user demand in the quarter. The core switching product lines which grew over 24% sequentially in the December quarter grew by only 1% sequentially in the first quarter. While this number is somewhat lower than expected, bookings for core switching in the quarter were very strong, and visibility into June is excellent. Management was very upbeat on the call regarding the demand outlook for both remote access and core switching. The most critical aspect of Ascend's business opportunity is the accelerating demand for WAN ATM equipment. After several years of disappointments and as many false starts, carriers are finally beginning to install full scale ATM-based networks. Whether the carriers offer native ATM services or not, they are deploying ATM in the core as a high-speed transport because ATM is currently the only technology that can seamlessly carry any kind of digital traffic (voice, video, and data- particularly Frame Relay and IP) For this reason, we believe there is little doubt that wide-area ATM will be one of the fastest growing sub-segments in the networking industry as carriers begin the deployment of next-generation broadband ATM networks. Into this market, Ascend's CBX 500 and GX 550 wide-area ATM switches have truly emerged as "killer products" within the carrier customer base. While the CBX 500 is a core switch in its own right, the GX 550 offers such a high density of OC12 and OC48 links that carriers who deploy the 550 often use the 500 as a fan out or edge switch. The combination of these two products' scalability, density, and feature sets is extremely attractive to carriers. Williams communications announced plans to purchase $150 million worth of ATM switches from Ascend in the quarter. While this was a big win from Ascend's perspective, we believe that Williams could take significantly more than the announced order. Additionally, management commented on the call with analysts that it did not recognize any revenue for the 550 in the quarter and has yet to recognize any Williams revenue. Both of these facts add considerably to the company's visibility going forward.Keep in mind that we only have $380 million in revenues from ATM switching modeled for Ascend in 1998. Ascend also has a product line inherited from Cascade's Sahara acquisition that compliments the core switching effort with a high-end multiservice ATM switch. This product line was up sequentially in the quarter (albeit off a small revenue base) and has the potential to add to revenues in the second half of 1998.REVENUE/PRODUCT BREAKOUT: Table 1 shows the company's revenue breakout by product area for the past five quarters. As the table shows, the Concentrator product segment rebounded in the March quarter. This is somewhat surprising due to the seasonality typically seen in the first quarter. Within the concentrator segment, revenues from TNT are continuing to be a larger percentage of sales with renewed strength in the U.S. and Europe, albeit continued weakness in Japan. Ascend reported only a modest sequential growth in its core switching segment due to the lumpy nature of orders and the fact that they did not recognize revenues from the GX550 product in the quarter. However, the demand outlook for Ascend's Core Switching products is exceptional - recent discussions with carrier customers indicated that demand for core ATM products is accelerating and that the GX550 is potentially a "killer product." We believe that Ascend's CBX500/GX550 combination could emerge as one of the few critical components within next-generation carrier networks.BALANCE SHEET: Ascend's strength in the quarter was reflected in its balance sheet performance as well. The company's net cash position increased by roughly $130 million to $605 million due to operating profits generated in the quarter, exercised options and deferred taxes. Accounts receivable DSOs were roughly flat sequentially at 72 days, and are within the company's model of 70-75 days. Management commented that they prefer offering extended terms to offering discounts. Ascend's inventories showed some improvement, but were also roughly flat in the quarter at 84 days. The continued high inventory levels were due in part to demo units shipped in the quarter; management commented that they expect inventory levels to decrease in the June quarter. The company's financial performance, as measured by its ROIC, shows continued improvement. Invested capital decreased by roughly $28 million and NOPAT was up $5 million.