Advanced Switching Communications: More Than an Impressive Name

With a name like Advanced Switching
Communications (ASC)
, the company should have a huge IPO. Actually, all
indications point to an explosive IPO.

The lead underwriter is Morgan Stanley and the price range is $13-$15 (about
6.25 million shares are intended to be offered). The proposed ticker symbol
is ASCX.

With data communications traffic bulging, telecom service providers are
building sophisticated packet-based networks. A packet system – which
transmits data in chunks – has been shown to be more cost-effective than
circuit-based networks. Then again, circuit-based networks were built for
telephone calls, not data traffic.

Telecom providers have been placing high-speed equipment within the backbone
of the networks. However, there is a weak point: the entry ways to the
telecom network. As for ASC, the company develops technologies to speed-up
these weak points. As a result, telecom carriers can provide broadband
services to customers using traditional voice networks – without the huge
costs.

So far, the company has 14 customers. And they are big: Dishnet DSL,
Broadview Networks, mPower, and UUNet. In 1999, revenues were $4.3 million.
As for the first six months of 2000, revenues surged to $12.9 million.
Although, losses were $9.7 million.

But there are risks to this offering. For example, three customers account
for 74% of all revenues in 2000. And, of course, the competitive
environment is intense. Big companies like Cisco and Nortel pose threats,
as well as savvy startups. Also, the valuations in the sector appear to be
excessive.

Yet, the demand for the IPO is red hot. Investors are looking at the great
success of last week’s IPO, CoSine
, as a barometer. In other words, expect ASC to be one
of the week’s biggest IPOs.

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