Visual Networks shares rise by 31%

Investors react to earnings report and ratings upgrade

July 10, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Shares of Visual Networks Inc. shot up 31 percent yesterday as investors reacted to a strong earnings report and equity analysts upgraded their ratings on the Rockville telecommunications software company.

Visual Networks' stock gained $10.5625 to finish at $44.50.

The main cause of the ascent was the company's positive second-quarter earnings, reported after the close of trading Thursday.

Visual Networks posted net income of $3.4 million, or 16 cents per diluted share, compared with a loss of $5.6 million, or 28 cents per share, in the year-ago period.

Revenue for the quarter was $19.2 million, up 60.47 percent from $11.98 million in the same quarter last year.

Company officials and outside analysts attributed much of Visual Networks' progress to purchases by such large customers as AT&T Corp., Sprint Corp. and MCI WorldCom Inc., which use Visual Networks software to manage data on their networks.

In addition, last year's numbers were burdened by costs relating to Visual Networks' $71 million acquisition of Net2Net Corp., which was completed in May 1998.

Excluding merger costs, Visual Networks had a net gain of 4 cents per diluted share in last year's second quarter.

"This has been probably the strongest quarter we've ever had. Momentum has never been stronger," said Angela Tandy, Visual Networks' manager of investor relations.

Wall Street shared that outlook, buoying Visual Networks stock throughout the trading day after some major investment houses raised their ratings of the company.

"Momentum is very strong as we enter the second half of the year," said Robert K. Lam of Bear Stearns & Co. Inc. in New York, who raised his rating on Visual Networks to "buy."

Lam said he had expected a 6 percent gain in revenue over the first quarter of this year; the company reported a 14.55 percent increase.

A beneficiary of yesterday's rise was the Maryland government. The state invested $250,000 in Visual Networks in December 1994 through a program designed to aid start-ups.

Richard C. Mike Lewin, secretary of the Department of Business and Economic Development, said that since March 24, the state has been whittling down its holdings in Visual Networks, which initially consisted of more than 750,000 shares. He said the state sold its last 182,500 Visual Network shares yesterday, garnering just more than $40 per share.

Lewin said the state's investment in Visual Networks would go into other businesses in the state.

"We now have a significant amount of money that will be reinvested in technology companies that are located in our state and employ Maryland residents," said Lewin.

Pub Date: 7/10/99

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