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

To: Dennis R. Duke who wrote (1371)	4/13/1998 6:47:00 PM
From: Dennis R. Duke	Respond to of 1629

Bernstein is very positive about ASND as their report title indicates "1Q EARNINGS PORTEND FUTURE STRENGTH". Which sort of speaks for itself. This report names more names and is much more bullish on the forward estimate than the others posted today. Their report says: Highlights * Ascend announced 1Q EPS of $0.26 vs. $0.25 consensus on revenues of $305 million * 1Q showed 8% sequential growth from MAX and TNT remote access products, as Ascend continues to benefit from Internet industry consolidations into the hands of the larger ISPs, many of whom are long-term Ascend customers (e.g. UUNet, PSINet, GTE, France Telecom, Deutche Telekom, NTT, Unisource and others). We expect this growth to continue, and even accelerate into the second half of 1998. * WAN Packet Switching showed modest growth in a seasonally weak quarter as Ascend decided not to recognize any revenue from its new GX550 ATM switch despite deploying the product with several large carriers. With several important contracts consumated in 1Q (GTE, Bell Atlantic, Williams) and several others expected in 2Q (Sprint, SBC), WAN Packet Switching should show double digit sequential growth over the next few quarters. * Operating margins were up to 25.2%, which management claims is a sustainable rate. We believe that we could even see slight improvement in future quarters, as remote access prices have stabilized just as Ascend is poised to introduce denser, lower cost remote access products * Book to Bill was better than one. Ascend pushed significant GX550 revenues into 2Q giving them considerable visibility into the quarter. No surprises on the balance sheet. * Ascend is poised for double digit sequential growth for the remainder of the year. We estimate 1998 EPS at $1.24 vs. $1.17 consensus and 1999 at $1.75 vs. $1.48. Rated Outperform Investment Conclusions Ascend Communications delivered against strong expectations, announcing 1Q EPS of $0.26 vs. $0.25 consensus. Revenues were $305 million, up 4.3% sequentially with gross margins of 64% and operating margins of 25.2%. Book to bill was in excess of 1, DSO was 72 days -- in line with the previous quarter despite longer terms offered to customers -- and inventory turns were 4.3x. Revenues were split 44.2% for remote access, 41.1 % for core switching, 9.9% for enterprise access and 4.8% for switching. Geographically, 74.2% of business was from North America vs. 25.8% international. We believe that these results are indicative of significant business momentum for both remote access and WAN packet switching. WAN packet revenues were up only modestly in the quarter, as Ascend recognized no revenue from its new GX550 ATM switch despite tens of millions of dollars in deployments. With new contracts won in the last 6 months from major carriers -- AT&T, GTE, Bell Atlantic, Williams, Brooks Fiber, NTT -- and several potential new contracts -- Sprint, SBC, international PTTs -- expected, Ascend will have accelerating growth from this business for several quarters. Remote access delivered 8% sequential growth in a seasonally weak quarter, and more importantly, saw stable pricing. The product problems of 1997 are over and Ascend's star-studded roster of ISP customers are beginning to order capacity. Given consolidation in the ISP industry, Ascend should continue to slow grow its overall share of this market, particularly as its new TNT-II platform begins shipping in 2Q and as customers begin to deploy Ascend's industry-first access concentrator based voice over IP gateway. Also of note, Ascend expects to keep prices stable, despite the pending introduction of the TNT-II, which features triple the density of the previous model and correspondingly lower per-port costs. In summary, Ascend has delivered against great expectations and has given indications that it is capable of even greater growth and operating performance in future quarters. We are expecting 1998 EPS of $1.24 vs. $1.17 consensus and 1999 EPS of $1.75 vs. $1.48. We rate Ascend Outperform. -------- This house, as I said, is more aggressive than many of the others. I like it. Dennis