Analysts pan Copper Mountain outlook

Copper Mountain (Nasdaq: CMTN) shares dropped over 21 percent on Friday on the heels of the latest cut to its revenue projection.

The company was downgraded at Dain Rauscher Wessels and analysts across the board were bleak on the company's prospects.

Shares of the Digital Subscriber Line (DSL) provider, which also cut revenue estimates for quarter just reported, fell $1.56 to $6.25 at the opening bell.

Copper Mountain met analysts' reduced estimates in its fourth quarter Thursday, posting a breakeven loss on a per-share basis. But the company also warned that first-quarter sales will drop to between $8 million and $10 million. First Call's analyst consensus for the period is for revenue of $50.93 million.

The latest bad news to come from Copper Mountain reflects the overall sorry state of the DSL sector. DSL-related companies Efficient Networks (Nasdaq: EFNT), Turnstone Systems (Nasdaq: TSTN) and Paradyne (Nasdaq: PDYN) have issued profit warnings, announced layoffs or missed estimates in their latest quarters, due to weakness in the market for competitive local exchange carriers.

A host of analysts slashed estimates and panned the company's outlook, citing a vanishing CLEC customer base as the overriding problem.

At Dain Rauscher Wessels, analyst Sanjiv Wadhani cut Copper Mountain to "neutral" from "buy-aggressive" and reduced 2001 earnings estimates.

In a research note, Wadhani wrote that lower-than-anticipated revenues resulted from order cancellations or postponements due to a dramatic drop-off in capital spending across Copper Mountain's entire CLEC customer base.

"Given that almost all of the company's customers are CLECs, we believe their segment's uncertainty and volatility could lead to significantly lower March quarter revenues and limit visibility through 2001," Wadhani noted.

Analyst Tim Savageaux at WR Hambrecht & Co. maintained a "neutral" rating of Copper Mountain's stock and "significantly" reduced top and bottom line targets for fiscal 2001.

At UBS Warburg, analyst Anton Wahlman reiterated a "hold" on the company's stock and lowered the 12-month price target from $5 to $4.

The analyst believes DSL investors would be better served by investing in well-diversified CPE companies such as Netopia or in companies with differentiating technologies such as Elastic Networks.

"In our opinion, the problem with the Copper Mountain story continues to be that the customer list is liquidating itself, while the good potential customers are still long-shots," Walhman wrote in his research note.