Ascend beats estimates

Continuing its comeback, the company announces second-quarter earnings bolstered by international growth.

3 min read
Shares of Ascend Communications were up in morning trading following a positive earnings announcement and an upgrade in estimates from a Wall Street brokerage.

Ascend posted net income of $59.1 million, or 29 cents a share, compared with a net loss of $48.8 million, or 26 cents a share, for the same period a year ago.

Today's earnings results beat analysts' expectations for the quarter by a single cent, according to First Call. Today's report represents the third consecutive quarter that Ascend has eked out profits just above Street estimates.

Revenues for the quarter were $327.4 million, compared with sales of $311.7 million for the same period last year.

The numbers reflect a 7.3 percent increase in sequential quarterly sales growth and a 12.8 percent increase in sequential income growth.

Ascend has shown signs of recovery following a tumultuous period in the aftermath of its merger with Cascade Communications last year, which is the largest reason for fiscal 1997's quarterly loss. The company also is one of several firms that has suffered from a general downturn in the networking sector in recent quarters.

"I am pleased with our second-quarter performance, attaining record revenues for the quarter," Mory Ejabat, president and chief executive officer of Ascend, said in a statement. "In addition, we showed good growth in our international markets and we were able to bring to market key products and services.

"Our ability to show continued sequential growth over the last three quarters is, I believe, an indication of the strength of our organization and the success we are having delivering the products and services that network service providers worldwide require," Ejabat added.

The executive said that the Asia Pacific and Japan regions post particular challenges for the company.

Ascend's networking equipment is used to connect geographically disperse sites and service providers using high-speed networking technology. The firm has created a niche for itself by selling its gear into various service provider accounts and continues to fend off various challengers in the hotly contested remote access hardware market.

The company's stock was up around 3 percent in morning trading, boosted, in part, by a favorable estimate upgrade from Morgan Stanley Dean Witter. The rise came after a downturn in advance of Ascend's earnings announcement.

The brokerage raised estimates for Ascend's 1998 fiscal year from $1.18 to $1.20 a share, and raised its fiscal 1999 estimates from $1.50 to $1.60 a share. It also upped its price target for the stock from $55 to $60 a share.

Other houses followed suit. BancAmerica Robertson Stephens, for example, raised its estimates to $1.21 from $1.18 for fiscal 1998, and to $1.61 from $1.46 for fiscal 1999. Robertson Stephens research analyst Paul Johnson also reiterated his "buy" rating on the stock.

Ascend has been rumored to be an acquisition target for a larger telecommunications firm. Ericsson is one possible suitor that has been named often. The company is said to be in acquisition mode itself, however, with Advanced Fibre Communications rumored to be a target. Shares of Advanced Fibre have traded in heavy volume during recent days amid the speculation.

Ejabat denied that there were any talks with Advanced Fibre Communications during yesterday's earnings conference call.