CACS Has a Banner Week

Carrier Access Corp. (Nasdaq: CACS), a mom'n'pop equipment vendor in Colorado, has watched its stock rise at an amazing clip following its report of a third consecutive quarter of profitability. The company is run by CEO Roger Koenig and his wife, corporate development officer Nancy Pierce, who together own about 56 percent of the company's stock. The generically named company sells -- ready for this? -- access gear to carriers. Despite its homespun roots, CACS shares have been the toast of Wall Street lately, having jumped in price more than 2000 percent from their year-ago price of $0.43. This week alone, they've gained more than 50 percent. CACS shares gave some back on Friday, falling $0.82 (8.14%) to $9.25.

The stock's big catalyst this week was a positive third-quarter earnings report. On Tuesday, Carrier Access reported earnings of $702,000, or 3 cents a share, on revenues of $15.9 million. A year ago, it reported a net loss of $14.9 million, or 60 cents a share, on revenues of $10.5 million. The company's cash position has also increased as its cash flow picture has improved. It had cash and short-term investments of $32 million at the end of the quarter, which improved from $29 million at the end of the June quarter .

Why the change in fortunes? The short answer is customer variety. Carrier Access has been adding new products to its edge routers, multiplexers, media gateways, and other gear to make it less dependent on its interexchange carrier (IXC) and competitive local exchange carrier (CLEC) customers, which were decimated during the telecom recession. During 2002, Carrier Access employed some 350 people and relied on CLECs for more than 40 percent of its revenues. Now its sales to wireless carriers make up 28 percent of its overall revenues. And the company has continued to cut staff with abandon -- going from 188 employees in February to about 140 now. One of Carrier Access's more popular offerings, the Axxius 800, combines a transport device, an edge router, and bandwidth grooming into a little box that sits at the access point of a wireless network. The Axxius is meant to help wireless carriers make better use of their network bandwidth, so they can begin to add 2.5G and 3G services. The company has also hopped into the hot fiber-to-the-premises (FTTP) market by building an optical network terminal (ONT) that's compatible with Alcatel SA's (NYSE: ALA; Paris: CGEP:PA) 7340 central office PON solution. Earlier this month, the two companies announced that they had completed interoperability testing between their respective FTTP solutions. During its earnings call Tuesday, CACS said it has started to see its first "meaningful revenue" for its ONT devices. Granted, it's important that the company has shown it has a growth story, but its possible that its stock is starting to get ahead of itself. Trading at more than $9 a share, CACS is now trading at a price-to-sales ratio of about 5 and a forward price-to-earnings ratio of 201, according to Multex.com. The company didn't give guidance on its next quarter, but analysts surveyed by Multex expect Carrier Access to earn 3 cents a share on revenues of $18.25 million during the period. — Phil Harvey, Senior Editor, Light Reading

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