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Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: Dennis R. Duke who wrote (4915)	6/4/1998 2:20:00 AM
From: Dennis R. Duke	Read Replies (1) \| Respond to of 18016

More International Market watch: biz.yahoo.com Taiwan of 2.84%, See above for detailed short article. Dennis

To: Dennis R. Duke who wrote (4915)	6/4/1998 2:47:00 AM
From: Dennis R. Duke	Respond to of 18016

This comes from UBS securities: ______________________________________________________________________ TDM revenues of C$150 million, which exceeded our estimate of C$140 million, were down 22% from last year and up 13% sequentially. WAN Packet revenues were C$200, million which was a bit short of our C$203 million estimate, and up 40% over last year and up 10% sequentially. The 36170 ATM switch rose over 10% sequentially. LAN Packet revenues were C$45 million, in line with our estimate and flat sequentially. Vivid sales, however, were up 20% sequentially within this segment. We are slightly decreasing our 1999 estimate to $0.75 from $0.80 due to lower gross margins and establishing a 2000 EPS estimate of $1.20. We maintain our Hold rating of given current valuation. ______________________________________________________________________ Highlights: Newbridge announced fourth quarter 1998 EPS of $0.13, which was in line with our estimate and the street consensus. This compared to $0.28 last year and $0.07 in most recent third quarter of 1998. Revenues of C$395 million exceeded our estimate of C$388 million, were down 11% over last year, and increased 10% sequentially. TDM revenues were C$150 million, which exceeded our estimate of C$140 million, were down 22% over last year and up 13% sequentially. WAN Packet revenues were C$200 million which was a bit short of our C$203 million estimate, was up 40% over last year and up 10% sequentially. The 36170 ATM switch was up over 10% sequentially. LAN Packet revenues were C$45 million, which was in line with our estimate and were flat sequentially. Vivid sales, however, were up 20% sequentially within this segment. We are slightly decreasing our 1999 estimate to $0.75 from $0.80 due to lower gross margins and establishing a 2000 estimate of $1.20. We maintain our Hold rating of given current valuation of 27x our calendar 1999 estimate of $1.09. ______________________________________________________________________ Analysis: Newbridge reported fourth quarter 1998 earnings of $0.13, which was in line with our estimates and the street consensus. This compared $0.28 the company reported last year. Revenues of C$395 million exceeded our estimate of C$388 million and were down 11% over last year and up 10% sequentially. The product revenues are summarized below. Product Revenue Sequential Incr. Y/Y Increase UBS Est. TDM C$150M 13% -22% C$140M WAN Packet C$200M 10% 40% C$203M LAN Packet C$ 45M 3% NA C$ 45M TOTAL C$395M 10% -11% C$388M The geographical mix was as follows: Geography Revenues Sequential Increase Year/Year Increase Americas C$213M 15% 3% Europe C$123M 18% -25% Asia C$ 59M -13% -16% TDM Revenues Rebound But Still Show Yearly Decline TDM revenues rebounded in the quarter with sales of C$150 million, which was up 13% sequentially. Sales, however, were still down 22% over last year in the quarter, and down 15% for the entire fiscal year. The rebound in the quarter on a sequential basis was most likely from the Latin America region as Asia still remained weak. About 80% of TDM sales are derived from overseas markets. We estimate that TDM sales will show yearly declines in the 5%-10% range in fiscal 1999 and 2000. More aggressive pricing action by Newbridge on the TDM business in an effort to win more business caused some decline in gross margins within the TDM product area. WAN Packet Revenues Show Good Growth WAN Packet revenues of C$200 million were up 40% over last year and 10% sequentially. The flagship 36170 ATM switch grew faster on a sequential basis. We estimate the sequential growth of close to 15%. Newbridge had 80 revenue producing customers for the 36170 in the quarter, including 15 new customers. This brings the total customer count to over 260. Newbridge should continue to see good growth in the 36170 ATM product given multi-$100 million contracts with Cable & Wireless and British Telecom. Both these contracts are just beginning to hit the revenue stream. The contract with AT&T Solutions should also add to the growth although to a smaller degree. The situation in MCI, we believe, is difficult to predict given the pending WorldCom merger. WorldCom has not been a user of Newbridge equipment in the past but this could change with the merger. The legacy 36120 frame relay product also grew sequentially, although we estimate the growth was less than 10%. The performance of Newbridge's WAN product offering will also depend on new products to be released in fiscal 1999. These include a 50 Gb/s version of the current 12 Gb/s 36170 ATM switch and ATM access concentrators acquired through the RadNet acquisition. LAN Products Show A Mixed Bag LAN sales of C$45 million were up slightly vs. the C$44 million last quarter. The flat performance masked the stronger performance of the VIVID switching product, which was grew 20% sequentially. We believe VIVID LAN product sales are now close to half of the overall LAN product area. Maintain Hold Rating We are slightly reducing our 1999 estimate to $0.75 from $0.80 based on a continued shift to WAN Packet products which carry lower gross margins than TDM products. In addition, pricing in the TDM area has been more aggressive, which probably will continue in the future. We are establishing a year 2000 estimate of $1.20. We maintain our Hold rating given the current valuation of 27x our calendar 1999 estimate of $1.09. ______________________________ Best of Luck to us all, Dennis