In an unusual filing, Ascend
has revealed that its sales and net income for the month failed to meet 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
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
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)