More Spending Rates A 'Buy’

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IRG Research analyst Hampton Adams III reiterated his “buy” rating on telecom-service provider Covad Communicatons Group Inc., but lowered his revenue and cash-flow estimates in light of anticipated spending increases on staff to help service voice-over-Internet protocol growth.

Adams lowered his VoIP revenue estimate to $30 million from $43 million and reduced his cash flow estimates to breakeven from $35 million in 2005. He maintained his $2.50 12-month price target on the stock. “However, with a strong pipeline and the sales force expected to nearly double this quarter, we believe VoIP revenue ramp remains the key catalyst to drive revenue growth and profitability,” Adams wrote in his report.