DMC Stratex Networks Q2 FY01 Conference Call - Part II, Operational Summary
Tuesday 17 October 2000
Sam Smookler, President & CEO
Order profile was spread nicely across the geographic landscape.
Americas continue to be strong as is Europe, Africa, and the
Middle East... our China business is robust and Asia in general
has perked up significantly with a combination of new networks
and expansion networks rolling out as well.
Altium especially continued at a healthy pace with orders of
$33.5 million for Q2 FY01 and $74.2 million for Q1 & Q2 combined.
This puts us way ahead of our plan for the year and positions us
to exceed $100 million in Altium revenue in its second year in the
market. During Q2 we continued our penetration of the emerging
fixed wireless access market in Europe by winning new contracts from
operators in Ireland, Germany, Spain, Austria, and the U.K. We’re
now seeing a trend for Altium in broadband fixed wireless access
applications for high-speed ATM transport, for mixed voice and IT
as the preferable choice. Altium with its leading edge spectral
efficiency, full range of frequencies from 6 GHz to 38 GHz, and
fiber compatibility is still the product of choice and the one to beat.
On the operational side, our hard work in managing growth is paying off.
During Q2 we shipped more than 12,000 radios which is an all-time high
for the company as we approach the 50,000 radio annual run-rate. Altium
in particular had a strong shipping quarter and the 38 GHz product is
now in full scale production. Altium backlog is strong for Q3 and, as
Carl indicated, we’ve added floor space and test equipment to increase
Altium capacity and we’ve ramped up a new off-shore high-volume supplier
for our signal processng circuit assemblies and indoor units.
I’m pretty enthusiastic in sharing with you that, during Q2, our
operations teams broke the back of the supply chain issues that had
been challenging us. Through the combination of adding additional
experienced supply chain managers across the company, taking
additional capacity at existing suppliers, systematically managing
supplier expectations throughout the quarter, adding new suppliers
where needed, and as necessary finding alternative components to
work around shortages... we’ve restabilized the supply chain process
here at DMC Stratex Networks.
I’d like to take this opportunity to say that many of our chief
suppliers were very responsive as we worked through these issues
together. I want to publically express our sincere thanks and
appreciation for a job well done.
As Carl mentioned, shipments of our popular XP4 product were up
dramatically, marking a real breakthough in production output.
The process capacity improvements achieved on XP4 will continue
in this quarter as well. As new designs continue through the
stabilization process in production, we’ll be increasing first-pass
yields and we set an objective for another significant increase in
output for this quarter.
Our millenium development is still on track. The 311 Mbps product
will be rolling out at the end of FY01 and the OC-12 (622 Mbps)
product will follow 1-2 quarters later with other new products
following those. We believe that the timing and the new technologies
supporting these products will, just like Altium, match the real
needs of the market. We’re already working with major customers
on the roll-out of these next-generation products.
In looking at the mobile market, the mobile build-out continues to
be strong and growing as we continue to support all mobile
infrastructure technologies. Mobile data is now driving additional
base-station capacity deployment in addition to the continuation
of voice-based mobile around the world.
Looking ahead, we’re working with customers on next generation cellular
(aka 3G or UMTS) and initial network specs show great opportunity for
our broadband products. Timing looks like 9-12 months out and will
produce another wave of growth opportunity for us.
Our management teams and leadership that we put in place across the
company have now taken root. All are on a course of continuous
improvement in the way in which we manage our lines of business.
We’re continuing to demonstrate improved productivity across the
company. One metric we use is annual sales revenue per employee...
which for us was $385K per person in Q2 FY01... up about 15% from
the same period last year and which puts us in the top 10% of
leading telecom companies in terms of this metric.
The balance sheet management continues as an important focus going
forward and, with our supplier situation now under control and our
shipping linearity improving, we’re planning for inventory turns
of 4.0 and heading for 4.5 in the next 6-9 months. Receivables are
also moving in the right direction and should continue to improve.
These operational improvements as well as factory-yield improvements
and product mix change over the next few quarters gives us confidence
about strengthening our gross margins and moving toward our opreating
model of mid-to-high 30’s. We have specific action plans in place
to make this happen.
All-in-all the fundamentals of our business continue to be stronger
than ever, the market is vibrant, our product portfolio is strong,
and the great team people here at DMC Stratex Networks are prepared
to execute on the opportunity. We look forward to the challenge and
excitement of the future.
I’d now like to turn the call over to Chuck Kissner, Chairman of the
Board of Directors, for some additional comments on the company’s
performance and our plans going forward.
[That’s about 29.5 minutes into the 1 hour 15 minute call. Chuck
speaks for about 12 minutes before opening up the call to Q&A.] |
