Stratex Networks, Inc. (STXN) Message Board

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Technology Stocks : Stratex Networks, Inc. (STXN)

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To: lazarre who wrote (992)	7/20/2000 9:42:46 AM
From: Rob Preuss	of 1762

Lazarre, You've got it exactly right. We missed revenue (top line) estimates by about $10M but beat earnings (bottom line) estimates by $0.02/sh. How can that be you ask? Like this... + The whole industry is having trouble getting parts. + For DMIC, this has affected their low-margin high-volume products like XP4 and DART. + At the same time, DMIC is not having trouble shipping high-margin product like Altium. The result: + Inventory of unfinished low-margin products has increased while they try to get for parts, + Backlog of low-margin products is high while they try to finish and ship them to customers, + Overall gross margins have skyrocketed to 35% since they're shipping a greater percentage of high-margin Altium products, + Revenues came in a $86M instead of the expected $95M, but due to the higher margins, earnings came in at $0.12/sh instead of the expected $0.10/sh. In the meantime, demand for DMIC's products is at an all-time high as evidenced by record new-product orders totalling $126M for the quarter. The parts shortages are likely to continue for the next two quarters. This is (and should be) a major focus of DMIC management... if they can get the parts, then they can ship the products and get even better revenue & earnings. We have a good management team, they can't work miracles but they'll do as well as anyone can to resolve these parts shortage problems. They've added new suppliers and they're getting more parts from existing suppliers so I expect them to ship more product this next quarter. I also expect overall gross margins to fall to about 34% because they'll be shipping more low-margin products (shipments of high-margin products increase as well). In the meantime, new ultra-high-capacity products being developed under their "millenium" program are on-track. In short... if you can hold your shares for 6 months or longer... BUY MORE NOW! Rob

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