CC notes:
.16 vs. First call of .12
Factors behind success:
Sales bolstered by international, with steady growth in domestic. business subscriber division still requires considerable investments. Manufacturing under utilized. As we ramp, we'll see margins firm up. If trands in communications infrastructure continue, we'll have a strong year. Wireless markets are entering a rapid growth phase. All products are covered by ISO9000.
We booked 1/2 million in subscriber orders in Q3. New products in broadband components for Internet. $2.4 million order from STII and Netro, for LMDS. Other quotation activity, as well.
Two reasons for strength:
1) technology --- new patents (low power comsumption VCOs)
2) customer relationships --- have over 10 years doing business with key customers, Nokia, Motorola, Ericsson and others. New business builds on these relationships.
We are closing in on real opportunities. Catapulting into new areas. We've brought on a new analyst from American Frontier. Will continue to build in hopes of more recognition.
Q&A:
Q: (Shield Asset Management) Tax rate?
A: Same as last Q.
Q: Will handset business take a couple quarters to ramp?
A: Yes. It takes time to get full recognition.
Q: Subscriber handset business and VCOs --- are they higher cost and higher quality than companies need?
A: We offer VCOs at compedtitive prices. Need quality for phones designed for Internet use.
Q: What is new broadband offering?
A: They're related to broadband data --- LMDS and Point to Multipoint transfer for higher amounts of data.
Q: Are these still VCOs?
A: No. They also include up-converter modules. May have as many as 200 components. Doing very, very well in LMDS.
Q: Manufacturing in Denver?
A: Yes.
Q: Uses for LMDS?
A: Internet access. Seeing increase in demand. A contract release is coming soon that's really exciting.
Q: How many VCOs per phone?
A: One to transmit and one to receive. Making dualband that operates as one function.
Q: They operate across all kinds, CDMA, etc?
A: Yes.
Q: New capabilities of lines?
A: Consumer products running at 1 million pieces out of 6 to 8 possible. (Didn't get the details on the second line.)
Working to fill capacity. We're at the right position at the right time.
Q: Growth in orders, were they consistent across the quarter?
A: Seeing increase toward the end of Q. 4Q is largest for bookings. Ericsson, Motorola, Nokia --- all book then.
Q: Wireless Internet, size of revenues?
A: No number in front of me.
Q: Operating cash flow?
A: Only what's in press release. Can't say more till 10Q is filed.
Q: Pricing sequentially and year to year?
A: Some price erosion, about 12% per year.
Q: CTS is competition?
A: No. It's the Japanese.
Q: Backlog?
A: Pretty healthy. Right on track. Largest orders happen in 4Q. (13.0m) is at low end. Will be higher at end of Q4.
Q: RFPs for subscriber proposals, you had 10 in various stages last quarter. Update?
A: A lot came in late in 2Q, some no response, some are now orders, and some being evaluated. 8 still out there.
Q: Same thing for subscriber market?
A: Expect to have substantial order is Q4. "We'll have some good orders." Official answer is: "two to four quarters out."
Q: Any 10% or larger customers?
A: Yes, Nokia and Motorola.
Q: Utility rate?
A: Capacity utilization --- 1 million pieces per year, with capacity of 6 to8.
Q: Goal for end of year?
A: By 4Q 2000 we'd like to be at 85%. We'll add second line when we get close.
Q: Capacity of subscriber market. . . there are 200 million in sales next year. . . at 2 VCOs each, if you have 10% of market. . . Is there possibility of missed opportunity? Are you waiting too long? (to add cap)
A: There's always a balance. I pulled 85% out of my ear. We evaluate as we go along.
Q: Will costs incrfease for 24-hour factory usage?
A: We can only do 2 1/2 shifts. (maintenance)
Q: Nokia, Motorola -- what's relationship?
A: Nokia we're valued supplier. We literally lift our shirts, our skirts. They do the same. We share technology.
Q: Are engineers visiting Nokia?
A: Yes. We had 3 there last week. In a fast-paced world, there is a lot of partnering.
Q: Difference in Varil's relationship to customers versus competition?
A: (We're flexible. The customer is always right.
Closing remarks:
Hopefully when you tun in for Q4, you'll be very very pleased. We're expecting a strong quarter.
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Reminds me of JDS Fitel about a year ago. :)
Pat |
