Ramp Recovers From Early Halloween Scare

Its stock took one of the biggest one-day hits in memory, as shares
plunged 52 percent on Oct. 22 following a quarterly report that fell short of
analysts’ forecasts and a warning from company executives of delayed
profits.

In the past three weeks, however, Internet access hardware vendor Ramp Networks (RAMP)
has bounced almost all the way back from its October surprise. RAMP
shares were trading early Thursday afternoon at 20 3/8. That’s just 5 percent
below the Oct. 21 closing price of 21 =, it’s also a 126 percent increase over
the 9 7/16 closing price of Oct. 28.

Certainly part of the reason that Ramp has recovered is that Internet
stocks in general have performed well in recent weeks. A number of ‘Net
companies have seen their stocks register triple-digit price gains since
mid-October.

Ramp Networks executives also deserve credit for handling the situation.
Since the stock drop the company has issued a steady stream of press
releases touting new products, an independent survey proving Ramp’s
dominance in the SOHO (small office/home office) market and an award
from a PC trade publication.

Mostly, though, I think investors are correcting an over-reaction to
Ramp’s Q3 results and spending warning. The report showed that net loss
increased to $3.6 million from $3.1 million in Q3 ’98, though the recent
loss includes a $1.2 million charge for legal and severance costs.
Excluding that one-time cost, net loss in Q3 was 12 cents a share, which
failed to meet the consensus analysts’ estimate of a 10 cents per share
loss.

Disappointing, no doubt, but hardly worth causing Oct. 22’s selloff
stampede, especially since revenue growth was strong. Ramp reported $5
million in sales for quarter ended Sept. 30, a 108 percent increase over the
$2.4 million in last year’s third quarter.

On the Monday after Ramp’s fall, I wrote that its stock would recover
“as investors regain their perspective.” That appears to be happening
now, though I don’t expect a real vote of confidence (in the form of a
run-up) for RAMP at least until the next quarterly report, which will
give investors a better idea of the company’s direction.


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