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Analysts pan Copper Mountain outlook

Shares of the digital subscriber line provider drop more than 21 percent after the company once again trims revenue projections.

    Copper Mountain shares dropped more than 21 percent Friday after the company once again trimmed revenue projections.

    The DSL (digital subscriber line) provider, which also cut revenue estimates for the most recent quarter, was downgraded by analysts at Dain Rauscher Wessels, who said that the company's prospects look bleak.

    Shares fell $1.56 to $6.25 at the opening bell.

    Copper Mountain met analysts' reduced estimates in its fourth quarter Thursday, posting a break-even 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 a 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, Turnstone Systems and Paradyne 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 (competitive local exchange carrier) 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.

    Wadhani wrote in a research note that lower-than-anticipated revenues resulted from order cancellations or postponements because of 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 maintained a "neutral" rating of Copper Mountain's stock and "significantly" reduced revenue and profit targets for fiscal 2001.

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

    Wahlman believes DSL investors would be better served by investing in companies such as Netopia or 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.