Ascend files bad month
In an unusual 31-day filing, networking vendor Ascend Communications reveals its sales and net income aren't measuring up to expectations.
In a filing with the Securities and Exchange Commission, Ascend said that for the 31-day period ended July 31, the company had net income of about $2.9 million and sales of about $62.8 million. The period comes just one month after the close of the second quarter.
The networking company, which has managed to generate increased revenues for the previous eight consecutive quarters, won't continue to improve on its past results at the same rate.
The company's stock lost about 10 percent during trading to close down 4-3/4 at 44-11/16 from yesterday's close of 49-7/16. Ascend was the most actively traded stock on the Nasdaq; volume reached 24.8 million, nearly triple the company's average.
Herb Maher, an analyst with the Advest Group, said it is not unusual for the company to ship a disproportionate amount in the last month of the quarter.
However, despite the accepted back-end-weighted pattern, Albert Tobia, an analyst with Montgomery Securities, downgraded the stock to a "hold" from a "buy" rating.
"We believe that these results for the first month of the quarter are below expectations, given that only 18 percent of September quarter revenues have been recognized in the first month. We expected that this September quarter would record revenue in the following manner: 25 percent in July, 25 percent in August, and 50 percent in September," said Tobia in a report released today.
Based on the company's report, earnings for the month were 2 cents per share. Analysts are expecting profits of 36 cents a share, according to First Call.
The company reportedly exited the June quarter with a substantial backlog position for the 56-kbps modems for the TNT remote access device. This led analysts to expect a generally stronger first month, said Tobia, as the company shipped this backlog. Analysts are particularly concerned by the fact that the company is entering the softest month of the year, August.
The analyst speculated that a delay in the European release of 56-kbps modems as well as increased competition has contributed to the shortfall and may cause continued problems going forward. "We are concerned that competing remote access platforms are coming to market, in the second half of the year, that should increase competition dramatically," he wrote. Competitors will include Cisco, 3Com, and Bay Networks.(See related story)