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

To: djane who wrote (46545)	5/11/1998 3:08:00 AM
From: djane	Respond to of 61433

5/11/98 NY Times. Support Grows for Faster Modem Speeds By SETH SCHIESEL Lending international support to a U.S. effort to give consumers high-speed access to cyberspace, the largest foreign telecommunications companies have agreed to join an industry group to work on ways to transmit huge volumes of information over standard telephone wires. The group intends to announce Monday the membership of British Telecommunications, Deutsche Telekom, France Telecom, Nippon Telegraph and Telephone, and Singapore Telecommunications, according to people involved with the organization, known as the Universal ADSL Working Group. ADSL stands for asymmetric digital subscriber line, a technology that the group said could allow consumers to link their personal computers to the Internet at speeds 30 times as fast as those possible with the most advanced modems generally available today. Compaq Computer, Intel Corp. and Microsoft Corp., three titans of the personal-computer world, announced the group's formation in January along with the United States' six largest local telephone companies. The group is trying to make modems based on ADSL technology available to the general public by the end of the year. The support of the overseas phone giants promises to strongly increase the group's prospects of developing a global standard for the phone-line technology. Many variants of the system have been invented, but the lack of a single standard has held back deployment by telephone companies, which are reluctant to invest hundreds of millions of dollars in network equipment that could prove incompatible with other companies' systems. For the ADSL group, the foreign carriers' support should make it easier to win the support of the International Telecommunications Union, which coordinates global technical standards. The group is hoping to have the ITU's approval by the fall. Within the United States, the support of the foreign carriers also gives U.S. telecommunications companies new leverage in their battle with the cable-television industry to provide the next generation of technology for connecting consumers to the Internet. Many technology and media executives believe there is a vast market waiting to be tapped by companies that can deliver lightning-quick Internet access to the nation's households. Currently, even the fastest modems commonly available often make browsing the Net a frustratingly slow experience. The nation's local telephone companies predict that many consumers would be willing to spend up to $50 a month for an Internet connection that could provide in seconds what takes today's modems minutes to deliver. As a bonus, the version of ADSL technology being developed by the working group could provide a continuous Internet link and normal telephone service over the same line, allowing people to simultaneously talk on the phone and surf the World Wide Web. Dozens of telecommunications equipment companies are involved in the working group, including Aware Inc., a small company based in Massachusetts, which has contributed technology that could enable a consumer to set up an ADSL modem without the help of a trained technician. Last week Lucent Technologies Inc., the giant communications-equipment maker spun off from AT&T Corp. in 1996, announced that it had licensed Aware's technology for use in Lucent's microchips intended for ADSL modems. Deploying such subscriber-line systems quickly and in a user-friendly way is imperative for most big local phone companies because the cable industry has taken an early lead in delivering high-capacity, or broadband, access to cyberspace. Analysts estimate that about 200,000 homes in the United States now use modems connected to a cable-television network rather than telephone wires. The number of homes now using various ADSL technologies is a mere fraction of that. Helping the deployment of high-speed data systems is also critical to the personal-computer industry. Put simply, if most homes remain connected to the Internet by today's relatively thin pipelines, there is less of a reason for consumers to buy faster computers and more powerful software. Microsoft, though, has been covering its bets on network-access technology. The company is one of the main forces behind the ADSL group, but Microsoft has also invested $1 billion in Comcast Corp., one of the nation's largest cable-television companies. Home \| Sections \| Contents \| Search \| Forums \| Help Copyright 1998 The New York Times Company

To: djane who wrote (46545)	5/11/1998 3:43:00 AM
From: djane	Read Replies (1) \| Respond to of 61433

5/11/98 briefing.com on Networking Stocks [Unbelievably lame "analysis." ASND "inventory problem"? What have they been smoking (not that there's anything with it)? Why is briefing.com always wrong? Their inept commentary seems corrupt/unethical. djane] Networking stocks have put in a mixed performance lately. Cisco (CSCO) and Ascend (ASND) have been rising steadily, 3COM (COMS) has been trading water, and Bay (BAY) has fallen back. Stock Performance The following charts show that CSCO and ASND have been star performers lately: CSCO Chart ASND Chart COMS Chart BAY Chart Wall Street Recommendations Cisco is clearly Wall Street's favorite of this group, as shown in the following table. Strong Buy Moderate Buy Hold Moderate Sell Sell CSCO 19 13 3 0 0 ASND 11 10 7 1 0 COMS 8 12 14 0 0 BAY 3 9 15 0 0 This strong ranking for CSCO reflects investors strong preference for companies that have dependable performance. Right now, investors are willing to pay huge premiums in terms of valuations for companies that are the leaders in their fields, and that continue to have strong earnings growth. Microsoft and Dell are other examples of this. Revenue and Profit Problems In fact, CSCO is the only company in this group that has been able to maintain strong revenue and earnings growth. All the others have experienced problems., REVENUE Most Recent Quarter Prev Quarter Prev 2 Q Prev 3 Q CSCO 26.7% 38.9% 36.6% 51.6% ASND 4.2% 1.6% 8.7% 51.5% COMS n/a n/a n/a n/a BAY 6.7% 25.3% 15.1% 1.4% All of these companies have experience significant earnings slowdowns, although Cisco not only remains dominant in terms of size, but is extending that lead. PROFITS Most Recent Quarter Prev Quarter Prev 2 Q Prev 3 Q CSCO 0.43 (+26%) 0.39 (+26%) 0.37 (+42%) 0.35 (+40%) ASND 0.26 (-16%) 0.24 (-25%) 0.20 (-29%) 0.31 (+41%) COMS 0.02 (-96%) 0.04 (-93%) 0.48 (-4%) 0.48 (+4%) BAY 0.04 (-60%) 0.27 (+170%) 0.22 (-12%) 0.14 (-48%) Ascend and 3Com have had inventory problems, while Bay Network's problems seem to run deeper, to include a product development cycle that is not hitting on all cylinders. Valuations Valuations on all these companies remain high, even relative to this market, in part because of confidence that long-term demand for these products is virtually assured with the growth of the Internet and other needs. In fact, optimism now seems to run rampant. Ascend The market seems confident that once Ascend works out its inventory problem, that good times lie ahead. As a result, the stock has nearly doubled this year. This has pushed the price/earnings ratio (P/E) for this company to an impressive 45, based on earnings of $1.01 the past four quarter. This would not be so surprising if earnings were temporarily depressed and expected to explode. However, the consensus estimate for this year is for growth to just $1.18 a share and for 1999 to just $1.49 a share. Not bad growth, granted, but that still brings the 1999 P/E down to only 30. Ascend stock now seems to have most of the good news in it; and while momentum could carry it higher, this is a company that can not disappoint with earnings any quarter this year, or the stock price is at risk Bay Networks Bay Networks trades at 37 times trailing earnings, but that is in part because of the very low earnings in the most recent quarter. This company is perceived to be under severe competitive pressures, but for those who believe it can get its act together, it offers some upside. Earnings were $1.26 a share in 1996, and it is only expected to earn $0.95 in what is basically next year, fiscal 1999 (ended June). 3Com 3Com is also trading at a very high P/E because they basically didn't make any money the past two quarters. If they get there inventory problems cleared up, prospects improve. COMS is expected to earn $1.45 next year (FY 1999 ended May 1999), which gives it a relatively low future P/E of 22. However, COMS has more lower margin products than some of the other companies, and needs to successfully roll out new products. That $1.45 is no lay-up. Cisco Cisco is king. It trades at 49 times past four quarters earnings, and 35 times next years (FY 199 ended Jul 99) earnings. Pretty pricey. But the market is willing to pay huge premiums for leaders in the tech sector, and Cisco looks like it can keep it up for a while. Comparisons Which company is the best bet at this point? In some ways, this is a microcosm of the whole market. There are huge valuations on market leaders, while companies that have had earnings hits have rebounded on the belief that earnings will pick up in the second half of the year. There is one argument that the big P/E stocks are the most vulnerable in any correction, but will keep outperforming if the market holds up. Another argument is that the stocks such as Ascend, where investors seem to have already priced in a strong rebound, are most vulnerable because earnings might remain stagnant in the second half of the year. In essence, if nothing changes, these stocks could lose their recent gains. Briefing believes that forecasting a market correction is always difficult, and that the market fundamentals remain good. Therefore, betting on the market leaders is hard to argue with. On the other hand,a strong second half earnings rebound is far from certain, especially for companies with Asian exposure (there just isn't any economic rebound there yet). Therefore, stocks such as Ascend that have momentum now will need everything to fall exactly in place to retain substantial upside. Bay Networks and 3Com are more bets on product cycles and management than on the financials. They both also need to avoid disappointments, but Bay has some prospects if its new products exceed expectations. [ Index ] Investor Tools Markets at a Glance Quotes/News/Charts Stock Watch Enter Stock Order Open Stock Orders Options Trading Transaction History Account Balances Account Records Portfolio Summary Switch Accounts c Copyright 1998 E*TRADE Securities, Inc. All Rights Reserved. This page was downloaded by your browser Monday, May 11, 1998 03:35:52 ET and is the latest version available as of that time. Copyright c 1998 Charter Media, Inc. All rights reserved.