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

To: Glenn McDougall who wrote (9820)	2/24/1999 10:02:00 AM
From: Bron-y-aur	Respond to of 18016

Perspective from briefing.com this morning: 08:55 ET ****** NEWBRIDGE NETWORKS (NN) 27. CEO Lutz said, "This was a good news - and not so good news - quarter." He has a better perspective than the market. After the close Tuesday, Newbridge Networks (NN) reported fiscal third quarter profits of $0.17 per share. The headlines all say that this was in line with Wall Street expectations. But back on February 4, expectations had been that NN would earn $0.22 a share. Until they warned, that is. In fact, when NN warned that day, they suggested that earnings this quarter would be $0.18 a share. Wall Street, in its ever accommodating mode, didn't want to hold them to even that standard, and forecast an "easier-to-beat" number of $0.17 per share, probably anticipating that NN would come in a classic "penny above." Of course, they did not, and CEO Lutz notes in the press release that NN actually didn't meet Wall Street expectations. Revenue growth was a very good 26% above the year ago level, and that represents a significant pick-up from the gains of recent quarters of -10%, -2%, +6% that had already been on an uptrend. The press release highlights the impressive sequential gains in what they consider their future growth engines, ATM (asynchronous transfer modes) and IP (Internet protocol), of 45% and 35%, respectively. But the $450 million in revenue reported for the quarter was also less than expected prior to the February 4 warning, so it too was as in-line with forecasts, but only because of lowered expectations. NN stock had been on a tear, rising from 15 in October to a 52-week high of 39 7/8 in mid-January. Then, somebody seemed to know something before the official warning, as the stock fell to 28 the day before NN warned. Since then, the stock has had little net change. This earnings report should be accepted as neutral by the market, and Briefing.com views NN as reasonably priced based on current and prospective earnings. NN does have some very good growth prospects, and they have been managing expenses well. The stock, however, has taken much of that into account, as it trades at 34 times current year (ending Apr 99) earnings. That isn't cheap given the current status of earnings, but provides some upside if NN does earn the Wall Street forecast of $1.15 in the year ended Apr 2000. It could be something of a good bet - or not so good a bet - relative to other opportunities for investments.