Below are several posts from the SDLI thread. Pat Mudge who imho is one of the top analysis of SI is posting. This should give us all more insite. Thanks Pat.
Disclaimer… I do not own any SDLI at this time, I do own JDSU.
Regards
Glenn
To: jay silberman (364 )
From: pat mudge
Friday, Jul 30 1999 11:19AM ET
Reply # of 372
SDLI's conference call held on July 27:
Financial highlights from Mike Foster, CFO:
52% revenue increase year to year, excluding IOC, increase was 58%.
Total revenue increased 15% sequentially.
DWDM grew 175% year to year and 23% sequentially.
Alcatel, Corning, and Lucent were each above 10% of revenues; 5 customers were
over 3 million, and 12 were between 500, 000 to 3 million.
US Gov't was 13% versus 16% last quarter and 31% a year ago.
International revenue was 36% of total, up 160% year to year; Asia was up 50% y/y,
equalling 7% of sales.
74% of sales were in communications versus 54% a year ago.
Gross margins were 42.2% versus 40.7% Q1 and 31% a year earlier. Contributing to
improved margins: greater product mix including DWDM, increased yields, better
utilization of fixed manufacturing, and increased ramp of undersea fiber products.
Earnings increased from .04 to .16 y/y, and excluding IOC they were .20.
$27.6 million in cash and cash equivalents; inventory $2.8 million, DSOs 73 days vs. 69
days, primarily due to ramping in Europe.
Corporate highlights from Don Scifres, CEO:
DWDM growth was strong with 980 nm laser and pump modules leading the way.
Reasons for dominance include patented grating stablization and high power. As the
technology moves to higher channels, power and stabilization become more critical. This
segment grew by a factor of 3 in 12 months.
In Q1 the company announced a 4-year contract with Alcatel and in Q2 they ramped
production substantially. The company also published results at a conference in Japan.
They're the acknowledged leader in 980 nm undersea pump lasers. Other companies
have taken notice and SDLI is now in qualification tests, gearing up for Q4 and 2000,
both for Alcatel and others.
Discussion of product lines for undersea products: 980, 1480, and 1455 nm Raman (?)
amplification devices. In the last they've shipped for first field deployment and the units
are being tested at a number of companies.
Acquisition of IOC broadens product line into transmitter side of market, including 10
gig light modulators, a big market. They have an agreement with a major telco for this
product and it could ramp in Q3 but will definitely be important in Q4.
Summary of company goals to expand technology leadership, enhance manufacturing
capabilities, and expand partnerships:
Technology
Now have 230 patents either issued or pending. Continued qualifications of next
generation chips. Advanced chips in 980 nm and 1480nm. Have received 6 industry
awards. Excited about technical position.
Manufacturing
Adding production shifts and adding facilities. Improving yields. Moving into 40,000 sq.
ft. facility in British Columbia, shipping in 4Q. Added clean rooms and other facilities to
50,000 sq. ft facility in Santa Clara to meet 980 nm undersea production. Yields will
improve further.
Customers
Signing for 10 gig and succeeding in 980 nm.
Guidance: Last quarter we projected 10% sequential growth and achieved 15%
sequential in Q2. This was based on DWDM and 10 gig modulators. We're guiding
20% growth (over 1H) for second half, based on 35% or greater growth in DWDM,
weighted towards the 4Q. Ramping in 3Q. Q3 will have better gross margins with
acceleration in Q4. Prospects in 2000 are improving with 50% or greater growth
predicted.
>>>>>>
That ends the public presentation. I'll post Q&A later today. (Time for coffee. :)
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To: jay silberman (370 )
From: pat mudge
Saturday, Jul 31 1999 2:35AM ET
Reply # of 372
Jay --
I understand your feelings regarding the market. Usually by the time I figure out a
pattern, it changes.
I'm staying long as I've been sorry every time I've taken profits.
Here's the Q&A I promised:
Q: Will the 10 gig rival 980 nm pumps?
A: It's a new product. The 1999 market is in the range of $100 million and has high
growth potential.
Q: What are percentages for undersea and what are opportunities with Tyco?
A: Above 10% (10 to 15). Can't comment on customers or potential customers.
Q: What are opportunities with Japanese?
A: I believe we have best chip. Desired by all operators. People need high power with
stabilization.
Q: What will submarine percentage be in 2000?
A: 25% or better.
Q: Capacity for 980nm was 150,000 run rate. Is it on track?
A: Yes, on track
Q: Are you running at capacity now?
A: Yes. And hope to increase in 2000.
Q: Were Lucent delays made up in other areas?
A: Don't comment on particular customers. Submarine market came in strong in Q2.
Undersea demand is more than we can produce. Wafer production ramping as fast as
we can. We could have sold more.
Q: CATV/cable --- how's it going?
A: Market is strong. It's around 5% of business. But will continue to be strong.
Q: Geographic breakdown?
A: Europe was strong --- 29% of revenues, triple prior year.
Q: What's growth in second half? Especially DWDM growth in Q3?
A: Seeing it (second half) up 35% or greater, weighted to 4Q. See new programs
ramping in Q3 and more in Q4.
Q: Market share in 10 gig?
A: We'd like 20% in next 12 mos.
Q: What about 40 gig?
A: We're focused on 10 gig now --- would rather not comment on 40 gig.
Q: Will IOC contribute to operating profits?
A: Definitely in Q4 --- maybe in Q3.
Q: What's driving Europe?
A: DWDM, 980 pump modules and submarine chips.
Q: Any chanages to European operations?
A: Consolidating IOC. They're adding facilities and ramping production.
Q: How many customers from IOC?
A: 5 to 10.
Q: 1480 update?
A: Introducing 1455 nm for Raman (?). Seeing interest from submarine and potentially
terrestrial. Very excited about opprotunities.
Q: Pricing trrends in 980?
A: Strong and firm. We command premium prices b/c of quality. Working on 1550.
Q: Undersea capacity constrained --- are you losing customers?
A: Undersea qualifies one source for each product. They want us to ramp fast.
Q: Other customers?
A: Seeing purchase orders from second customer --- we have agreement --- and we're
trying to ramp for Q4. A third customer working on qualification.
Q: Gross margins, are you comfortable?
A: They continue to improve. Customer demand is based on technology.
Q: Moving to new qualifications?
A: Terrestrial side we're already qualified by most of significant customers.
Opportunities for gaining new customers is small b/c we sell to all the major ones
already. Undersea market has huge growth potential. Excellent demand.
Q: Any other capacity constraints?
A: 10 gig light modulators --- we're ramping in UK.
Q: Acquisitions?
A: Continue to look.
Q: Why DWDM weighted to Q4?
A: B/c we're ramping undersea and 10 gig --- we're scrambling to add manufacturing.
Q: How long will growth continue?
A: Not at a factor of 3 (as just experienced) --- second half 35%.
Q: timing of 1/2 watt, when shipping?
A: 1Q 2000. 1 watt chip still being tested --- 2001 product intro.
Q: Ideas regarding acquisitions?
A: We look for variety --- would like to broaden in fiber optic telecommunications.
Look at technology and financials.
Q: Percentage for terrestrial pump growth?
A: 40%. --- 10 gig will be good in 2000.
Q: Overall growth?
A: 2000 will be stronger than we projected 3 months ago. 10 gig and undersea are
strong. 50% is doable --- could be greater.
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