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

To: Rich Young who wrote (2856)	10/15/1998 1:37:00 PM
From: john d	Read Replies (3) \| Respond to of 4135

I wanted to share some thoughts for what it's worth. The good and the bad. What the quarterly results and and conference call tell me is that: Xylan was able to successfully guide us lower for expectations going forward. Xylan is no longer on the hook for 10% sequential growth Q to Q. Rather they have stated they will outgrow the industry growing at 5-6%. Already Robertson Stevens has lowered estimates for this quarter and next year, same with Paul Weinstein. Others to follow. Estimates are coming down. Good - Xylan can now overachieve each quarter. Bad - analysts lowering estimates usually isn't good for the stock price. I would have liked Xylan to say "we are comfortable with estimates in Q4", but they didn't. During the call you could sense this uncertainty. I walked away thinking if Alacatel and IBM are flat. Europe and Asia are flat. Then this quarter is a stretch. I'll be curious to see how First Call Q4 numbers shape up over the next couple weeks. Bad - there still is uncertainty in the air re Q4. You could tell the analysts were definitely suprised with the direct performance and are probably wondering if this was an anomaly or a trend. Xylan needs another quarter of strong Direct/VAR business. Good - Xylan knows they need to build their direct sales force and demonstrated success this quarter. Bad - some may still be skeptical. In summary, I got the sense that Xylan is a real company. I'm comfortable that they will finish 1999 over $450 million while maintaining margins +/-. They will earn over a dollar per share. With stock at 13, 99PE is currently under 13. Even if long term growth is reduced to 25%, the stock is trading at half where it should be. Xylan has a very attractive valuation. I've decided to hold my shares another year. Good Luck to us longs!