EXFO, part II:
INVEST IN STRATEGIC SECTORS. We have established a structured review
process to ensure that our research and development activities are aligned with
our corporate strategy. This rigorous review process has led us to focus on the
following strategic sectors:
- DWDM Market. We recently launched a number of DWDM testing solutions, including optical spectrum analyzers, tunable laser sources and fully automated test systems to capitalize on the DWDM market opportunity. We believe that we are well positioned to take advantage of this growing market because we offer one of the most comprehensive selections of DWDM test products. We intend to further improve our DWDM testing solutions to address the requirements of systems requiring higher channel counts and increased transmission speeds.
- Network Monitoring Market. Carriers have become increasingly concerned about the loss of revenue related to system downtime, especially with the widespread deployment of DWDM networks that concentrate data traffic along fewer fibers. As a result, carriers need to automatically carry out network monitoring in real time to locate faults and degradation points along a network in order to prevent system downtime or shorten restoration time. We have developed our remote fiber test system to address the needs of this market. As carriers' optical networks become more complex, we intend to upgrade our remote fiber test system by providing features like wavelength monitoring, which enables the analysis of power and drift of each wavelength and by supplying improved software for better integration with carriers' existing operational support systems.
- Scientific Product Market. We believe that several new market opportunities exist for our family of scientific products, especially with the increasing reliance of optical component, value-added optical module and optical networking system manufacturers on automated test, measurement and monitoring equipment. We intend to provide manufacturers with both off-the-shelf and customized test solutions. We have established a team of 13 product managers in this division, consisting of engineers and scientists, several of whom hold master's or doctorate degrees in Optical Sciences or Electrical Engineering.
Increase Manufacturing Capacity. We recently purchased a building of approximately 112,000 square feet and we intend to make available 60,000 square feet of this additional space for manufacturing. This facility, once equipped, should increase our manufacturing floor space by 167%.
At the Optical Fiber Conference in March 2000, we introduced 13 new products, including optical spectrum analyzer test modules for our FTB-300 UTS and IQ-200 OTS platforms, widely tunable laser sources for DWDM testing, automated test systems for DWDM optical components and value-added optical modules, a single-slot optical time domain reflectometer platform and related test modules, as well as high-power and low-polarization sensitivity power meters.
Since 1985, we have sold more than 85,000 product units to more than 1,500 customers and our products are distributed in over 70 countries. Our customers include telecommunications carriers, cable television companies, public utilities, private network operators, third-party installers, equipment rental companies, as well as optical component, value-added optical module and optical networking system manufacturers. During fiscal 1999, we delivered products to more than 650 customers and for the six months ended February 29, 2000, we delivered products to approximately 480 customers. During fiscal 1999, no single customer represented more than 6.8% of our sales and for the six months ended February 29, 2000, no single customer accounted for more than 5.5% of our sales.
The following table is a list of our top U.S. and Canadian customers based on gross sales during the last 12 months:
AT&T Corporation
Bell Atlantic Corporation
General Dynamics Corporation
GTE Corporation
Newcourt Technologies Corp
Nortel Networks Corporation
Qwest Communications International, Inc.
SBC Communications, Inc.
US West Communications, Inc.
International
Our international sales are largely handled by a network of distributors around the world. During fiscal 1999, international customers accounted for 44% of our sales and for the six months ended February 29, 2000, they represented 36% of our sales.
The following is a list of some international end-users of our products:
Bestel S.A. de C.V. (Mexico)
Daewon Corporation (Korea)
ECI Telecom LTD. (Israel)
FOCI Fiber-Optic Communications Inc. (Taiwan)
Instituto Costarricense de Electricidad (Costa Rica)
Korea Informatics Telesis Inc. (Korea)
Marconi Communications SPA (Italy)
Nortel Networks Corporation (United Kingdom)
Telecom Argentina (Argentina)
Telkom S.A. LTD. (South Africa)
As of May 31, 2000, we employed 671 full-time employees who originate from approximately 20 countries. 185 are involved in research and development, 258 in manufacturing, 93 in sales and marketing, 77 in general administrative positions and 58 in communications and customer support. During the last 12 months, we added more than 240 employees. We have agreements with the majority of our employees covering confidentiality and non-competition. Only manufacturing employees are represented by a collective bargaining agreement, which expires in 2004. We have never experienced a work stoppage. We believe that relations with our employees are good.
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The only negative I could find was the dominance of the Pres/CEO/Chrmn. Germain Lamonde who holds 38M "multiple voting shares," each with ten votes. With only 7M out of 45M shares available, I'm not sure how many institutions could take positions. It will certainly limit liquidity.
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