customer concentration
Historically, CATT's top 4 customers have been NTT, Motorola, NEC, and Lucent. As a percentage of total revenues, revenues from these 4 customers increased from 60% in fiscal 1997 to 73% in 1998 to 87% in 1999. The risks of having such a large amount of total revenue concentrated among such a small number of customers became apparent late last year when NTT temporarily cut back on purchases from CATT, sending revenues, and the stock price, plummeting.
In 2000 we are seeing a dramatic reversal in the degree to which CATT's revenues are concentrated among just a few customers. In the conference call last month Dr. Karp stated that the company's top 4 customers accounted for about 50% of revenues in the quarter ended June 30, down from 87% for all of fiscal year 1999. All indications are that this percentage will continue to decline. Alcatel, which has been a relatively small customer in the past, is now about to become a much larger customer. Cisco, which has been a relatively small customer in the past, is going to be a significant customer for the first time in the current quarter. Business is also increasing with Nortel, Fujitsu, and Nokia.
As the number of CATT's large customers increases, not only do the risks of a loss of business from any one customer decrease, but so do the chances of an overall increase in sales. As Dr. Karp noted in the last conference call, CATT is now really well positioned in an exploding market.
Byron |
