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

To: gbh who wrote (52008)	8/13/1998 2:11:00 PM
From: Spaw	Respond to of 61433

GBH, What I actually said is sideways to down. It's just dropped out of the channel and has not made it back in. My outlook for ASND is bullish. I'm really looking at the short term here, with a possible move into the 45 range. The stock will probably retest the low before moving higher. And there is that strike price pain thing that always goes on at expiration. Just my opinion, and I have been wrong before. --spaw--

To: gbh who wrote (52008)	8/13/1998 4:20:00 PM
From: djane	Read Replies (1) \| Respond to of 61433

Another good TSC/Petrie article on Tekelec [ASND references] [Key sentence: "Lucent has little to offer in the way of SS7."] thestreet.com Top Stories: Tekelec's Strong Signals By Kevin Petrie Staff Reporter 8/13/98 3:42 PM ET Here's a technology mania that might bear fruit: It's installed, it works and it helps small supplier Tekelec (TKLC:Nasdaq) land new business even if the much-hyped Internet telephony takes a while to materialize. Wall Street has lumped the technology under the name Signaling System 7, the language spoken by the traffic controllers that overlay ordinary voice networks. Tekelec is arguably the best builder of SS7 products, which makes it a well-positioned arms dealer or even a takeover candidate. Tekelec's stock has been resilient amid the recent Nasdaq troubles. Its shares have gained about 25% since reports first surfaced that Internet builder Ascend (ASND:NYSE) would purchase SS7 supplier Stratus Computer (SRA:NYSE) -- a deal that was confirmed Aug. 3. Although the initial rumors hurt Ascend's stock, they helped add 55% to shares of Stratus. Stratus and Tekelec make different kinds of SS7 products. "When you see Stratus getting bought, and you see Tekelec [stock] going up, that means the market realizes that SS7 processing is going to be really hot," says Tom Nolle, president of CIMI, a consulting firm based in Voorhees, N.J. Tekelec is not a CIMI client. Tekelec already stands strong. It is growing revenue at a 71% annual clip with its plumbing for ordinary telephone service. Now, a clamor is building about the notion of running phone service over the Internet -- a distant prospect that will take a lot of work. Large suppliers like Cisco (CSCO:Nasdaq) and Ascend are taking the intermediate steps of using conventional SS7 equipment to split data messages from overloaded phone networks and ship them over the Internet. In time, SS7 might even help Internet telephony take shape. "Tekelec is one of the premier suppliers of SS7 switching," says analyst Brian Modoff with BT Alex.Brown, a Tekelec banker. Modoff says Tekelec's versatile units perform more functions than Stratus' technology, affording Tekelec a long-term advantage. "The company stands to benefit significantly from this convergence" of phone networks with the Internet, he says. [Which raises the question of why ASND didn't buy Tekelec...] "We believe investors should increasingly see Tekelec's position at the center of the SS7 network as similar to Ascend's in frame relay and ATM," or asynchronous transfer mode, adds analyst Tim Savageaux with Volpe Brown Whelan, also an underwriter for the thinly followed stock. Tekelec rigs carrier networks for the future in other ways. One established line of products enables customers to retain their phone number when changing phone companies -- a growing necessity in the U.S. and Europe with the onset of competition. Tekelec also has products that diagnose problems on networks. For over a year, Tekelec has sold SS7 and other products to Bell Atlantic (BEL:NYSE) and its predecessor Nynex -- sales that resulted from extensive testing. Bell Atlantic constituted 15% of Tekelec's revenue in the first quarter. The Bell Atlantic contract is a sign that Tekelec likely is stealing SS7 market share from its rival DSC Communications (DIGI:Nasdaq). While Bell Atlantic marks a coup, it's unclear when more Baby Bells might pick Tekelec as the bulls expect. A Tekelec official declined to say whether more local phone company customers are on the way. SS7 has turned powerful heads. Cisco acquired Lightspeed in December for its SS7 tricks and is buying other phone suppliers such as Summa Four (SUMA:Nasdaq), whose products perform different tasks than Tekelec. "I think [Tekelec] would be a great acquisition for Lucent [LU:NYSE]," says research director Jane Snorek with Oberweis Funds, although she's unsure whether the company's executives would sell. Her firm invested in the stock one year ago and still is buying shares. "I'd be surprised if they're not bought by the end of the year," Nolle says. And he thinks a takeout is the best strategy: "Their value is going to sharply diminish" as a group of SS7 startups primp themselves to be acquired at cut-rate prices. To date, Cisco has shipped no products that do what Tekelec does, and Lucent has little to offer in the way of SS7. Cisco declined to comment on takeover speculation, Tekelec's technology or its own SS7 plans. A Lucent official didn't return calls for comment. Tekelec declined to comment on the takeover speculation. Some investors could care less about a buyout. "We're certainly happy owning the stock regardless of any short-term or long-term buyout possibilities," says Michael Prouting, an analyst with Insight Capital. Tekelec is valued at $1.2 billion, or 33 times trailing earnings and eight times revenue. Its broad-based rival DSC Communications, about to be acquired by Alcatel (ALA:NYSE), trades at $3.4 billion, or 144 times earnings (excluding charges) and two times revenue. With numbers like those, Tekelec represents a relatively cheap growth play to some investors. "You're paying a little better than 30 times [earnings] for a company that's been beating the numbers," says Charles McCurdy, research director with Veredus Asset Management, a longtime shareholder that is buying more Tekelec shares along with other proven performers amid the market turmoil. Tekelec has beaten profit estimates every quarter since 1996. In the second quarter, Tekelec's net income jumped 148% to $8.4 million, or 14 cents per share, from $3.4 million, or 6 cents per share, one year earlier. Revenue hopped 71% to $42.9 million from $25.1 million in the year-ago period. c 1998 TheStreet.com, All Rights Reserved. TOP \| ABOUT US \| CONTENTS \| SUBSCRIBE \| ADVERTISE \| TRADE ONLINE \| FEEDBACK \| SEARCH \| HELP