Presentation:
newbridge.com
Press release:
newbridge.com
Conference Call notes:
Earnings are .18 --- two cents above consensus --- and exclusive of one-time gains and losses.
WAN packet was $357 vs.319, up 12% sequentially and 60% y/y. Now 72% of over-all revenues.
NSA was 51% vs 48%, with double digit sales growth. US had highest growth of any region. EMEA was 38% vs. 41%. AP showed growth. Carriers represent 80% of sales.
Gross margins were 56.5%, down 0.2 due to product mix.
Alan's comments:
The co is largely past the impact of operations problems, beyond supply constraints. Reorganization is complete. Still working on EVP Operations, but it won't take much longer. In past 14 months have made three divestitures, implemented one joint venture and made one acquisition.
Some have asked why the co went dark on press. Alan said, "We needed to prove we could make the quarter and regain the confidence of analysts. . . . We hope this credibility continues." Others have asked about IP strategy and acquisitions. "You will know shortly. [News] is imminent."
Based on strong growth some want to ratchet up the year. "I've told them, don't take the year up. I want to keep expectations under control." [Comfortable with] 60% year/year.
Q&A:
Most congratulated NN on the great quarter. "Congratulations, great quarter!" was heard over and over.
Q: What's ATM demand as a percentage of WAN packet?
A: Demand for 36170 is very good. Increasingly bullish on LMDS. We're in production, in allocation mode. Demand is strong around the globe. We don't disclose percentages of product groups, but [if you look at diagram] ATM is approximately 3/4.
Q: What's competitive environment? Any pricing pressures?
A: No severe pricing actions. No competition for LMDS. 36170 in good demand. On target for 50/320.
Q: Book to bill?
A: A thimble less than one.
Q: In US was strength from SBC or broader?
A: SBC was largest customer but [we] had other strengths. Also note strength in Europe.
Q: DSOs?
A: We fixed operations this quarter. Will work on this, especially in Asia. We've collected from several large accounts since the Q closed.
Q: If you'd collected before the close, what would outcome have been?
A: Close to last quarter.
Q: MPLS?
A: We're building it in to the 36170. Interworking with router world is essential.
Q: Are you seeing migration from ATM to IP?
A: Just the opposite. Most IP is running on ATM. Issue is services that run over the network. Customers don't care how they get there. We're focusing on these.
Q: Update on TeraBridge?
A: Still getting started. Lots of visits, equipment in trial, great potential revenues.
Q: 28 new customers --- is this a record?
A: We've consistently been over 20. This could be a record.
Q: Regarding gross margins, will you keep same controls going forward?
A: Yes. Guidance is for 20 basis pts improvement per quarter. We'll continue emphasis on cost controls.
Q: Any updates on product development and acquisitions?
A: Expansion of ATM to 320 gigs "on front burner." We have significant development teams and maintain our schedules. As for IP acquisition, we'll sate your appetite in the near future.
Q: Update on Siemens and Stanford?
A: No worries re: Stanford. Everything going to plan. Siemens volume is down [$87m vs. over 100]. Still quite good. Partnership revolves around distribution.
Q: Future of Siemens' sales?
A: Depends on effectiveness of sales force. We're not selling as actively for them.
Q: Impact of terabit routers on NN's ATM sales?
A: No impact any time soon. Size of market isn't as important as size of edge market.
Q: Of the $495, how much was from Q4 or Q3?
A: All 115m from Q4 was shipped. We maintained level of backlog that we had at the beginning.
Q: What about Siemens and 3Com? TDM sales?
A: TDM will remain constant. 3Com not on radar screen. Siemens is good, but has changed. We use their channel, and compete in some places. Not a joint development relationship. No joint investments. COMS has CPE for DSL. We've worked well together to win business.
Q: CLEC penetration?
A: Making serious progress. Have significant sales force dedicated to it.
Q: Value of Juniper investment? Plans?
A: Yes, we're in the lock-up. It's a paper gain right now. Timing is determined by JNPR. Any acquisitions are not dependent on JNPR gains.
Q: Operations?
A: Interaction between operations, sales, engineering, and finance is far superior than what we had before. When Q ended, we had a conference call between top managers --- London [Maidenhead], Wn., DC, Canada --- there was a sense of elation all the way around. The people involved like the changes. They know they're superior.
Q: What about outsourcing?
A: We already outsource. We buy sub-assemblies. New products and systems integration will be kept in-house. Will outsource lower level needs.
Q: Cost savings of outsourcing?
A: There are two predominant profit drivers: number of changes in product and changes to schedule. Stable products work well out-sourced. We will increase outsourcing, but it must be done intelligently.
Q: Inventory numbers?
A: We made a conscious decision to increase inventories. Will keep expectations in line. We increased raw material as well.
Q: Order intake according to product group?
A: No big change. No big swings within product groups.
Q: Liniarity?
A: Q2 has strong vacation period. We're actively working to keep Q linear.
Q: Update on 50/320?
A: Trials in November for 50. Shortly afterwards, 320.
>>>>>
After the CC I had a phone call from HQ and was told the atmosphere was extremely ebullient. And well- deserved.
This is not the end. It is not even the beginning of the end. But it may be the end of the beginning.
{2 pts. for naming who said this.]
Cheers!
Pat |
