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

To: Thomas M. who wrote (56205)	10/20/1998 12:13:00 PM
From: Duke	Read Replies (2) \| Respond to of 61433

Ascend down on third-quarter report By Tiare Rath & Binti Harvey, CBS MarketWatch Last Update: 11:59 AM ET Oct 20, 1998Tech Report ALAMEDA, Calif. (CBS.MW) -- Ascend Communications' stock fell 10 percent Tuesday morning after analysts expressed concern about third-quarter earnings and the company's future competitiveness. Ascend's (ASND) third-quarter income was $66.1 million, or 32 cents a share, vs. year-ago profits of $40.1 million, or 20 cents a share. Analysts surveyed by First Call estimated the networking solutions company to make 31 cents a share during the quarter, but "whisper" numbers -- earnings expected by investors typically higher than analysts' expectations -- ran as high as 34 cents a share. But several analysts downgraded the shares, expressing concern about the company's future. Warburg Dillon Read analyst Nikos Theodosopoulos lowered his rating to "hold" from "buy," saying the company needs design wins overseas in order to meet 1999 estimates. Theodosopoulos also expects reduced margins going forward as the company integrates its Stratus Computer acquisition. A 3-percent sequential decline in its core switching revenue also concerned investors. The company attributed the decrease to an estimated $15 million order delay. Analysts had expected revenue growth of about 20 percent during the quarter. A charge of $8.7 million for writedowns on loans to competitive local exchange carrier customers also drew a negative response. Ascend has been providing financing of capital equipment purchases to emerging carriers, triggering concerns about exposure to risk. BancBoston Robertson Stephens analyst Paul Johnson wrote in a research note Tuesday morning that the loans should be included in the quarter's financial performance as a cost of doing business. "The net result, in our opinion, is that earnings were 30 cents per share, not the 32 cents reported," Johnson said. Ascend told analysts it expects to extend more loans in the current quarter. Citing the company's declining return on investment capital, Johnson said, "In light of the increased level of competition in the market, we suspect that we may never see the company's historical performance achieved again." Shares fell 4 11/16 to 43 3/16. But looking ahead to the end of 1998 and into 1999, Ascend expects revenue strength in its North American and European service provider markets. Ascend said in a statement it's still "optimistic" that it will stay one of the "leading suppliers to service providers worldwide." The company also said it is "well positioned to deliver the integrated solutions network service providers are demanding today." Ascend said third-quarter sales rose 37 percent to $370.3 million from $270.4 million in the third-quarter of 1997. Tiare Rath and Binti Harvey are reporters for CBS MarketWatch.