Echelon Corp. (ELON)

[GGraessle]

Prudential is dropping coverage of this stock.

ELON: DROPPING RESEARCH COVERAGE
Echelon Corp. ELON / $12.42 / OTC
Nicholas P. Heymann • 212.778.1467 • [e-mail] Current: None
Mohammed Ali • 212.778.1534 • [e-mail] Prior: Hold
Risk: --
Target:
Industry: Market Underperform
All important disclosures can be found at the end of this report.
FY EPS P/E 1Q 2Q 3Q 4Q
Actual 12/01 $0.15A 82.8X $0.00A $0.00A $0.02A $0.13A
Current 12/02 $0.41A 31.1X $0.07A $0.12A $0.13A $0.09A
Avg. Volume: 200,000 Div/Yield: NA EPS Growth: NA
Market Cap: $493 m 52w Range: 22.40-8.40 P/E / Growth: NM
Shares: 39.68 m
HIGHLIGHTS
· Effective immediately, research coverage of Echelon Corporation by Prudential Securities is being
terminated because it no longer falls into our core coverage area. The last recommendation issued for
Echelon should not be relied upon going forward.
· Echelon reported 4Q02 EPS of $0.09, $0.01 above our estimate and previous guidance. However, this
compared unfavorably to the year-ago EPS of $0.13. Revenues for 4Q02 declined 5% year-over-year.
· Echelon's Enel utility deal has reached its full installation pace of 700,000 homes per month.
· Finmek, an Echelon supplier, risks not being able to provide letter of credit in Echelon's favor timely
enough and this could delay production of meters for the Enel project.
· Echelon's core business continues to be challenged by weak economic conditions
DISCUSSION
Effective immediately, we are dropping coverage of Echelon Corporation because it no longer falls into
our core coverage area. The last recommendation issued for Echelon should not be relied upon going
forward.
BUSINESS
Echelon Corp. (ELON), headquartered in Sunnyvale, CA, develops, markets and supports a family of hardware and software
products and services that enable original equipment manufacturers and system integrators to design and implement open,
interoperable, distributed control networks When installed, Echelon's LonWorks distributed control system enables devices to
become "smart" by being able to interact and communicate, as well as be remotely controlled and monitorable




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