There was an article in the interactive version of the Wall Street Journal today written by Rick Jurgens.
He interviewed Don Scifres, SDL, Inc's CEO.
Don stated that he expects 20 years of strong demand for the fiber optic components SDL makes.
Speaking to Dow Jones Newswires he said, "Prospects are very good over a long period of time."
Don also indicated that he is comfortable with the 78 cents a share that is the estimate analysts have for
SDL's 2000 net income. This is double the 39 cents posted in 1999. After this interview the estimate
was revised up to 79 cents. Because of the company quiet period Don couldn't comment on the
analysts' view that first quarter earnings will more than double from the 7 cents from a year ago, to 16
cents. As we know earnings are due to be announced on the 19th of April.
The article continued with a statements from Don about fiber optic networks using light waves to send
(transmit) voice and data signals through fiber optic cable and how fiber optics are faster and can carry
a greater volume than the electricity in the old copper cable networks.
SDL's main "horse" in the fiber optic race was pointed out to be a $2,000 product, the 980nm pump
laser, which powers optical amplifiers. The amplifiers increase the distance that light signals can be
sent and received through fiber cables. Don stated that the pump lasers, which are used in fiber optic
systems that span thousands of miles, accounted for about 40% or $75 million, of SDL's total sales in
1999.
SDL wants to add to its fiber optic product line and Don has high hopes for the Raman, a more expensive
pump laser which will power the new generation of amplifiers. Some Raman pump lasers, which cost
from $50,000 to $60,000 have been shipped, but sales of this product aren't expected to really take off
for a year of two.
Sales are on the Increase
Don wouldn't predict SDL's future revenue growth but did point out that the fiber optic component and
module sales were up 179% in 1999, which was 72% or about $135 million of the company's total sales
of $187 million. Printing and manufacturing lasers accounted for the rest.
As we know SDL owns 200 patents, and employs 60 Phd's. They spent $19 million on research and
development last year. A statement from COO Greg Dougherty explained that the company can't expand
development efforts fast enough to keep pace with revenue growth, mainly because it can't find enough
scientists and engineers.
Since February, SDL has acquired two companies, Veritech Microwave, Inc. and Queensgate
Instruments Ltd.,. Veritech Microwave is an electronic-component maker and Queensgate Instruments
Ltd. is a maker of monitoring modules. These two acquisitions will add to SDL's product line. Don
stated that SDL is actively seeking other acquisitions.
In order to improve profitability, SDL plans to boost its gross margin over 50% "within a couple of years,"
Don said. In 1999 gross margin was 43% up from 34% in 1998. To attain this they must improve the
yield - or percentage of usable components the come off the manufacturing line. Within the past 18
months they have tripled yield on its pump lasers. He declined to disclose the yield figure.
It went on to discuss the volatility of the stock and the highs and lows over the past year...which we are
probably all aware of...It also pointed out that SDL is trading at about 50 times its 1999 revenue, while
JDSU is trading at 100 times theirs.
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kat |
