Though strong second-quarter demand for 56-kbps products meant big revenues for the networker, its earnings still fall short of Wall Street estimates for the quarter.
Excluding merger costs, the company today reported net income of $62.4 million, or 31 cents per share, up 40.6 percent over its year-ago figures.
Wall Street analysts expected profits of 35 cents a share, according to First Call.
Ascend, including its $111.3 million merger costs for Cascade Communications and Whitetree, posted a loss of $48.8 million, or 26 cents a share, in the quarter ending June 30.
During the quarter, the company experienced a delay in getting products out the door, which may have held back results. But the third and fourth quarters will benefit as those delayed products move to fill pent-up demand, according to a report by Cowen & Company analyst Chris Stix.
Stix noted that demand could remain strong into 1998, but said a slowdown is likely thereafter.
"We believe the access concentrator market will slow significantly by the middle of 1998, when demand for ports may slow dramatically as the initial buildout is completed," said Stix.
Ascend's stock dropped 13 percent in early June after the company acknowledged a glitch that delayed shipment of its MAX-TNT remote access equipment. The stock closed today at 53-7/8, up from yesterday's close of 52-3/4.
A Morgan Stanley report said the delay in shipping 56-kbps products came at an "inopportune time," considering the product launched in Europe early in the quarter, but noted that Cascade enjoyed a seasonal rebound in sales driven by strong demand for the division's frame relay and ATM switches.
Competitors are expected to lag behind Ascend.
FORE's (FORE) revenues, for example, are expected to be up 14 percent year-over-year, though down 6 percent sequentially due to weakness in international markets.
Joseph Bellace, an analyst with Merill Lynch, said in a report that Shiva "="" rel="nofollow" target="_blank">(SHVA) will see the most significant decline in sales. The company may be hit with a 22 percent revenue slide.
Despite the charge, however, Bellace expects the combined Ascend and Cascade to report strong sales growth of 50 percent.
The $3.7 billion merger between Ascend and Cascade was approved by shareholders on May 29, and Cascade's last day of public trading was on June 30.
Earlier this month, Bellace upgraded the company's intermediate-term rating to "accumulate" from "neutral," causing the stock to jump 5-3/8.
During the quarter, the company's stock soared to its 52-week high of 80-1/4, and then proceeded to skid to its low of 36-1/8.
Yesterday, the company was picked up by Goldman Sachs and added to its recommended list of securities.
Today, Everen Securities initiated coverage on Ascend with a rating of "outperform" for both the intermediate and long term. The firm has a target price of $83 in the intermediate term and $100 in the long term. Analyst Christin Armacost predicted the company will benefit from strengthening its customer base of ISPs and telcos, and from a broader product portfolio.