DMIC was up over 20% today after investors noticed this
article featuring the company on the "New America" page
in today's issue of the Investor's Business Daily.
Rob
PS) I've heard rumor that Kevin Landis, manager of
FirstHand Funds (which owned over 2.5 million
shares of DMIC as of 29 February 2000) will
be on CNBC monday morning (10 April). He will
likely mention DMIC (since its one of his top
holdings) and this could bode well for further
share price increases next week.
====================================================
Friday 7 April 2000 (IBD: Page A9)
Cutting The Cord
Digital Microwave Seeks An Edge By Offering
Wireless Broadband.
by Chris Woodard, Investor's Business Daily
While digital subscriber and cable modem companies
fight it out on the ground, Digital Microwave Corp.
is going airborne in hopes of dominating wireless
broadband markets.
The San Jose, Calif., company manufactures digital
microwave radios used in public and private wireless
communication systems. Its broadband, medium-capacity
and long-haul radios are geared to move data, voice
and video over a variety of microwave frequencies.
"The vast majority of buildings in the U.S. are not
served directly by fiber, and the bandwidth requirements
are just skyrocketing," said Charles Kissner, company
chairman and chief executive. "Our whole mission is
to take extremely high-capacity backbone fiber and
distribute that closer to the customer."
High Demand, Little Access
What's driving growth for Digital is demand for a fast,
cost-effective way of bridging a bandwidth bottleneck
that keeps 95% of businesses in the U.S. from accessing
high-speed fiber-optics.
The company's new broadband Altium radoi and its XP4,
Dart and Spectrum II medium-capacity radios are designed
to bypass snail-paced copper telephone wires to tie into
fiber hubs.
Altium, Digital Microwave's top-of-the-line radio, can move
data at 155 million bits per second compared with less than
1 million bits for regular copper lines.
At the end of 1998, there were 142 million Internet subscribers,
but the number is expected to triple to more than 500 million
by 2003, a 30% annual growth rate.
While telecom players have spent billions of dollars on
fiber-optic networks, users are largely cut off from them
by copper telephone lines over the so-called last mile.
Bridging The Gap
Digital Microwave's technology gives telecommunication
providers a way to bridge the gap in a way that is
rapidly deployable, scalable and cost effective, says
Scott W. Searle, analyst at Dean Rauscher Wessels.
"We're in the early stages of a $2 billion-plus market
opportunity over the next several years," he said.
"Wireless solutions can act as an extension of and, in
the case of emerging markets, an alternative to fiber."
Digital Microwave has about 250 active customers around
the world, including wireless operators such as Winstar
Communications Inc. in the U.S., Vodafone AirTouch in
Europe, and China Unicom. The company also sells through
a number of third parties, including suppliers such as
Nortel Networks Corp.
Customers outside North America accounted for 87% of sales
in fiscal 1999. The company is up against some stiff
competition, though, from the likes of LM Ericsson, Alcatel
Alsthom ADR, Siemens AG, P-Com Inc. and Harris Corp.
Sally Anderson, senior portfolio manager for Kopp Investment
Advisors - Digital Microwave's largest institutional holder -
says the breadth of Digital's product offerings gives the
company an edge over competitors.
More Breadth
In addition to its radios, Digital Microwave also makes a
Unix-based remote networkwide monitoring and control system
called ProVision, and the company recently released a new
telecom chip dubbed Velocity.
"The breadth of their product line is definitely a clear
advantage," said Anderson, whose company holds 17% of
Digital Microwave's stock.
Founded in 1984, Digital carved a niche by selling microwave
radio systems for cellular phone systems. The company had
high management turnover until Kissner and his team joined
the firm in 1995.
As cellular operators began building up their networks, Digital
Microwave gained position throughout the globe, with annual
sales reaching $350 million.
The Asian financial crisis, though, caused orders to drop 42%
in the first quarter of 1999. Kissner sliced operating and
manufacturing costs 20% and moved to reposition the company
as a supplier of broadband wireless gear.
Swimming Upstream
The company accomplished that through acquisitions and stepped-up
research and development. By the third quarter in 1999, Digital
Microwave managed to add the Altium, XP4 and Dart radios to its
product lineup - this at a time when the company was having one
of its most disastrous years.
"We learned that when times are rough it's a valuable opportunity
to improve one's position," Kissner said. "We emerged from (the
Asian crisis) as having the broadest product line in the industry.
And we also emerged as the independent market share leader of
the world."
Digital Microwave reported sales of $77.4 million for the third
quarter ended Dec. 31, a 33% increase over sales of $58.3 million
for the third quarter of the prior year. Net income for the quarter
was 5 cents a share compared with an 11-cent loss for the prior year.
Searle expects Altium to post $17 million to $18 million in sales
in the March quarter, but the product should account for $100 million
in sales by the September quarter. First Call projects earnings of
15 cents a share for 2000 and 49 cents for 2001. The company trades
as DMIC around 32.
"Additional excitement surrounding the product line will likely
come with direct sales to traditional fiber service providers
durng the next several quarters," Searle wrote in a research report.
Kissner says he's comfortable with the projection.
"We're running a little bit ahead of the power curve on this thing,"
he said. "Demand is just really skyrocketing."
=====
Two charts are associated with the above article under the heading
"Grabbing The Air: Estimates project growth in Digital Microwave's markets."
The first chart, entitled "Global Wireless Subscribers", is a bar chart
rising steadily from 300 million in 1998 to 1500 million in 2003.
the second chart, entitled "Data-Enabled Handset Sales", is a line chart
rising almost exponentially from near-zero in 1999 to 400 million units
in 2003 to 800 million units in 2005.
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