Bay Networks Increases Estimates; Stock Jumps

Bay Networks Inc. said Tuesday that revenue and earnings for its fiscal first quarter will exceed analysts’ expectations because of strong sales and orders. The news pushed its shares up nearly 10%.

The Santa Clara-based firm’s rosy predictions mark the first time this year that a big computer-networking company has publicly advised analysts to raise their estimates.

Bay Networks said orders for the first seven weeks of the quarter ending Sept. 26 are running well ahead of forecasts. That will boost per-share earnings to 19 cents to 20 cents, said Chief Financial Officer David Rynne. Wall Street was expecting earnings of 16 cents, according to the average estimate of two analysts surveyed by IBES International Inc.

Bay is having a “fantastic” quarter, and sales growth should continue for several more periods, said Cowen & Co. analyst Vijay Rajamani.

Larry Burtschy, president of fund manager L.R. Burtschy & Co., which owns 1 million Bay shares, said the growth is evidence that the management overhaul and new strategy implemented by Chairman Dave House is starting to produce results.

Cowen raised its per-share earnings estimates to 20 cents from 16 cents for this quarter and to $1.15 from $1.10 for all of fiscal 1998.

Salomon Bros. analyst Peter Swartz raised his recommendation on Bay to “buy” from “hold.” Bay has “dramatically improved its corporate image” with customers, he wrote in a note to investors.

In its year-earlier first quarter, Bay earned $5.63 million, or 3 cents a share, on sales of $522.7 million.

Bay shares rose $3.13 to close at $37.13 on the New York Stock Exchange. Earlier the shares reached $37.31, their highest since March 1996. Shares of rival Fore Systems Inc. climbed $1.44 to close at $19.88 on Nasdaq.