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

To: Doug who wrote (6910)	10/8/1998 11:50:00 AM
From: MD Bryant	Read Replies (3) \| Respond to of 18016

Doug, Ascend IS NOT using 98 figures because they don't exist. We're still in 98. Ascend is using late 96 early 97 figures. STRIKE ONE. NN is NOT a Telecom Heavyweight, they are concentrated in several distinct technologies, and emerging technologies, hence the 15% growth rate is hogwash. Internet traffic is doubling every six months, that's 100%, if infrastructure expansion (and the costs that go with it are pegged at 15%, you and I won't be communicating soon) Likely bundled in those estimates are Routers and enterprise technologies which have dinky margins left. (I believe the growth you where referring to was REVENUE? -- Backbone is where the revenue is, which is why CSCO is scrambling to get a carrier class ATM solution) STRIKE TWO Telecommunications companies are generally immune to capital spending slowdowns (regardless of what you read in the press) because the underlying services are still utilized and continue to expand, hence, revenues are still realized. Additionally, American soil is not the only place to sell Telecom gear, USA holds 300 million people of the worlds 6 billion, or 5%. Telecom demand generally doesn't diminish, the web will be used, people will talk. In Canada, because of competion the phone networks are overloaded in the evenings due to flat rate calling plans. Expansion is required. (Guess who supplies Stentor?) STRIKE THREE. I agree margins are diminishing, however, we are uncertain to a number of factors: Margins on LMCS wins, expense reduction measures, value of worldwide ATT solution) Quick Analysis NN needs to produce $1.8MM CDN for every .01 on their EPS. 25% of the SGA cut AL mentioned would equal approx .04CDN per share alone. That leaves NN with about .05CDN per share to produce, that would put them at .29CDN for the quarter which is what they need to produce .19 USD at an exchange rate of 1.50. The .05CDN they need to produce translates into about 30MM in sales (or 9MM in Net Profit, hence .05 per share), which would put them at 452MM for the quarter. I believe that is EASILY achievable given their recent contract successes. Aside from that this is approximately only 5% sequential growth, not the 15% you pegged them at, which would asertain their revenues would need to be 490MM, which is indeed unatainable. Thoughts?