CATT and the Euro
With all the concern on Wall St. about the Euro I decided to go through my CATT file today to see if I could find any indications of any Euro problems for the company.
1. In a press release 8/14/00 CATT noted that new offices in France and Germany were opened last year and the UK facility was expanded. Judging from this the company expects increased business in Europe.
2. In a press release 5/22/00 CATT announced the sale of 3G test systems to Nokia. Apparently the Euro had no impact on CATT's ability to make a sale to a European company. CATT is on record as expecting large future increases in 3G test systems.
3. In the last conference call in July management stated that Japan was their largest market at around 40 percent of sales, followed by North America, then Europe. Any Euro impact would be limited by the fact that Europe is the company's smallest market.
4. There are a large number of competitive factors for telecommunications test systems besides just price. In its 10K CATT lists the following: the availability of a broad range of protocols, system performance, length of operating history and industry experience, product reliability, ease of use, and quality of service and support. CATT states that it "believes that it competes favorably with respect to these factors". Since CATT systems are superior in most respects, the company probably has at least some ability to offset the decline of the Euro by raising prices in Europe.
5. CATT's strongest competitors are U.S. and Japanese companies. Many of the companies that seem to be running into the most Euro trouble have strong competition from European companies. The decline of the Euro has made the products of companies with dollar-based costs more expensive than those of European companies. However, the decline in the Euro shouldn't make any difference to CATT as far as competing with other U.S. or with Japanese companies.
So in summary it appears to me that any Euro impact on CATT is limited by the fact that Europe is the company's smallest market, there are many other competitive factors besides just price, CATT's strongest competitors are not European, and the company probably has at least some ability to offset the decline of the Euro by raising prices. The company is planning on large sales increases in Europe and I can't see any reason to think that the Euro would have a big impact on this plan. However, I'm interested in what CATT management have to say about this so I have made a note in my CATT file to ask them about it in the next conference call which should take place in about 6 weeks.
Byron |
