Conf Call Notes copied from MasinVegas on the Yahoo board:
Network Peripherals has announced third quarter results along the lines of expectations. More importantly, however, Bill Rosenberger, President, did a comprehensive job of covering all aspects of the company's NuWave product line, including OEM potential as well as current interest in the products being offered. Highlights follow:
1) Rosenberger was quoted as saying "NPIX was a "very serious player" in the layer 3 gigabit market. The company has opened the door to yet another major OEM within the last month, and now appears to be in high level conversations with a dozen firms any one of which is capable of delivering a multi-hundred million dollar two year order.
2) NPIX announced two small OEM customers that will deliver $8 -$ 10 million in sales during 2000. The company also suggested that it will sign a reasonable number of additional such customers within the next couple of months.
3) NPIX predicted that it would have at least one level two OEM by yearend, and that it remains "live" at every large OEM it has negotiated with.
4) The Tolly Group, an independent testing lab, has found NPIX's switches to be top performing. The full report will be out in approximately 3 weeks, but a small portion of their opinion already appears officially on NPIX's corporate website. (http://www.npix.com)
5) The product line has been well received by the VAR channel, and NPIX is on target to generate approximately $50 million in revenues from sales interest based on existing indications of interest. Additional revenue potential exists from both secondary and major OEM's, and we will have updates as we move through the fourth quarter. When considered in conjunction with NPIX's earlier statements that it will have extra customers by that time, it suggests that 2000 revenues might be well in excess of $50 million even without a large OEM order.
6) First production runs will be produced in early November and will result in fourth quarter revenues.
7) There is an effort underway to combine the functionality of several of t he ASIC chips into one component, thus reducing the cost of producing all NuWave products. It is likely that this effort will bear fruit sometime in 2000, thus reducing costs and increasing profit margins.
8) The company stands with its belief that gross profit margins will be at the 50% level throughout 2000. This confirms our view that a $100 million in 2000 revenues (existing business plus a single OEM of note) will result in earnings of close to $1.75 per share.
Now...insofar as valuations are concerned, it should be noted that most companies providing layer 3 switching product are trading in excess of 15 times anticipated 2000 revenues. That suggests based on existing revenue potential, NPIX might well be "worth" approximately $750 million. As you know, there are 12.5 million shares outstanding, and this indicates that if the company gets the same multiple of sales as its major competitors, the stock might be worth nearly 2.5 to 3 times the current market price.
Assuming a single large OEM customer, 2000 revenues might well exceed $100 million. If existing industry evaluations hold, it is quite possible that NPIX common will trade in triple digits with a single substantive OEM order.
I am now completely confident that the company will be in business with significant sales of NuWave products. The rest of Wall Street will catch up with this view in short order, as NPIX will be presenting such information to the AEA Conference in early November. That conference, which is home to many significant small technology companies, has proven quite capable of creating significant market moves in stocks with an interesting story to tell.
NPIX has such a story, and is on the threshold of being a major player in a new explosive business segment, capable of profitable operation in just a couple of quarters.....with all the potential "surprises" on the upside. I believe a single OEM arrangement at the first tier level will result in a stock price in excess of "par".
Today's call makes me very happy. I hope that this news is a reward to those of you who have sat through the long development period in which NPIX shares floundered in single digits. It appears you are about to be paid for your patience.
Have a good day.
MAS
PS: It should be noted that EXTR, NPIX's largest competitor, is intentionally pursuing a business policy which will result in OEM sales of approximately 6% of total revenues, thus indicating only about $15 million in sales from this source in 2000. The salient question for those watching this situation develop is if all of the largest OEM's will want to give significant business to a company who is its market leader, clearly wants to price product on a private label basis, and who will continue being the behemoth competitor in the marketplace.
I for one, think not. NPIX will get business on account of EXTR's decision. And, given that per port prices are only about two thirds of EXTR's, there will be a large number of firms willing to do business with NPIX on the basis of product capability AND price. |
