Broadband equipment maker Turnstone Systems (TSTN) said it sees worse-than-expected fourth quarter results. Robertson Stephens downgraded its investment rating on Turnstone shares to long-term attractive from buy.
Analyst Paul Johnson says he downgraded the shares given the uncertainty surrounding the digital subscriber line (DSL) market for the foreseeable future. Johnson says this is the second time Turnstone has pre-announced for the quarter.
What led to Turnstone's woes? Johnson attributes a revenue shortfall to continuing weakness in its competitive local exchange carrier (CLEC) customer base. As market conditions have continued to deteriorate, notes Johnson, additional customers have cancelled or reduced their orders. As a result, management will take $13M-$15.5M in charges to increase inventory reserves and bad debt reserves. The analyst cut his $0.55 earnings per share estimate for 2000 to $0.40 and his $0.62 EPS forecast for 2001 to a $0.02 loss per share.