I don't think the name change has anything to do
with the slide. As far as I can figure, the slide
is due to the impact of the industry-wide components
shortage issue. During the last conference call,
they said that they expect the shortages to
continue to be a problem for the next two quarters.
As a result, I believe some big institutions have
decided to unwind their present position - possibly
with an eye to getting back in after a few months
when the short-term stock-price growth prospects
look better. Consequently, these institutions have
been selling blocks of 5,000 or 10,000 or 25,000
shares fairly steadily and patiently these past
few weeks... as long as they continue doing this,
the stock price will be under downward pressure.
If you are willing to look at the longer term, this
is a great stock to own and its a great stock to buy
at these prices. This company has great fundamentals
including:
+ no long-term debt,
+ best-of-class products,
+ top-notch management & operations,
+ extraordinary demand for their high-end Altium product,
+ strong demand for their other (DART/XP-4) products,
+ new products soon to be introduced,
+ rapidly growing market sector,
+ strong gross margins,
+ solid reputation,
+ profitable.
The gross margins were exceptional this past quarter because
they managed to ship a lot of their newer higher-margin Altium
products (which aren't affected by the component shortages
the way their other lower-margin products are). As they make
progress resolving the component shortage problems, I expect
revenue to rise but overall gross margins to drop (as they
ship a lot more of the lower-margin products)... but these
overall gross margins will still remain respectable (> 30%).
The new products will be based on their new "velocity"
chip set... this will lower their cost of production
enabling them to maintain or grow their profit margins
despite heated competition in this market sector.
I expect the next product will effectively be an "Altium"
point-point radio, but based on the velocity chip set
and offering 311 Mbps capacity instead of 155 Mbps;
I expect it will be at least as spectrally efficient
(bits of capacity per Hz of frequency bandwidth used)
as their highly-efficient Altium platform. After this,
they'll quickly introduce a product (still based on
the velocity chipset) with 622 Mbps capacity... initially
this, too, will be a point-point product but it will
soon be offered in a point-multipoint flavor as well.
These new "broadband" products will be real winners in
the marketplace. For example, current DSL service can
only reach customers that are sufficiently near the
service provider's central office... to resolve this
problem, service providers will install DSLAMs nearer
to the customers they want to reach... but they'll need
to get the data from those DSLAMs back to the central
office and they have only two choices for this "backhaul":
fiber or fixed wireless. Fiber has high capacity but its
costly and takes forever to install (especially in the high
density market areas the service providers want to reach).
Broadband fixed wireless products, such as the Altium
and the newer products based on the velocity chipset,
will be preferred for every new installation that doesn't
already have fiber in place. In addition, these products
provide backhaul for cellular phone systems and they
provide the "last mile" link to the many businesses &
buildings that don't sit directly on the fiber backbone.
These broadband network buildouts by service providers have
started to happen worldwide... but they'll grow in intensity
over the next few years. DMC Stratex' new products will be
ideally timed to hit the "sweet spot" in the growth curve
for these network buildouts. I expect the 311 Mbps products
to be introduced this Fall and to be rolled-out to reach
full production during the following 6 months. The 622 Mbps
point-point product will follow this, being introduced in
the first part of CY01 and rolled out to reach full production
by Fall CY01... with the 622 Mbps point-multipoint product
coming out in Summer CY01 and hitting full production by
year-end CY01.
There are some exciting times ahead for DMC. Now is a good
time to build a position and "strap yourself in".
Rob |
