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Bay Networks 4th Quarter Results

Has BAY NETWORKS (NYSE: BAY) finally turned the corner? With shares up $2 5/8 to $31 7/8 today, some investors believe that the worst is over and the best is yet to come. The product of the 1994 merger between Wellfleet Communications and SynOptics has been a disaster in the eyes of many observers. As recently as May, the company traded as low as $15 5/8 per share. Fourth quarter details are contained in the company's press release. Investors can get the entire scoop in the conference call report, available to the right.

Bay 4Q 1997 Call

Bay Networks' Web Site

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Bay Networks

Cisco Systems

3Com Corp.

Networking Industry _________________

Bay Networks reported earnings of $0.15 per share before charges on $543.0 million in revenues. Revenues increased a slim 1.4% year-over-year to a level Bay Networks called a "record," although the 5.8% sequential jump was a fairly solid performance. With current 1997 earnings estimates clustering around $0.90 per share and 1998 estimates shaping up at $1.25 per share, Bay Networks trades at 25 times forward earnings. Does the fact that the company is generating 30%-plus earnings growth because it has been a train wreck for the last two years potentially impact the multiple that investors are willing to place those earnings? Some investors might suggest that the company does not merit a premium multiple until its profit margin comes close to those of its competitors.

Is Bay Networks finally turning around or is it just riding the coattails of Cisco Systems and 3Com Corp.? Can David House and the folks at Bay possibly compete with the 800-pound gorillas in the networking industry? Is this an opportunity to short the stock? Let us know what you think by posting in the message folders!

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