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Technology Stocks : Efficient Networks Inc - (Nasdaq- EFNT)

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To: Mark[ox5] who wrote (571)	10/21/2000 11:03:38 PM
From: Mark[ox5]	Read Replies (1) of 675

Comments on CC by "theme" My comments in parenthesis Topic: Gross Margins & Component Shortages Margins improved from 27% area to 33% area quarter over quarter Reasons and focus areas for continued current and future improvement in Gross Margins 1) Economies of Scale 2) Cost Reductions in Product Design 3) Product mix/more software value added 4) Components Pricing Long term targets remain in 40s. No change in guidance (Analyst asked this) Product Mix improvement will/has included shift to business class products, VoDSL, Virtual Private Networks, Firewalls. Last 2 aquistions have been software based to continue on this theme and focus. Component shortages: this Q have been capactitors, transformers, flash memory Shortages limited ability to fulfill end of quarter sales. Analyst Question: Relationship with ACT Manufacturing; did it help you secure components? Answer: Yes, this is a vital business relationship. Other vendors were asking for 10 to 20x the normal price on spot market for capacitors. To understand the effect of this, we use 80 to 90 capacitors on each board. [For those new to Efficient, the company gave a $50M loan to ACTM for exactly this purpose and "outsiders" criticized them for this action. (and analyst reports were praising them for it) Now you see the results.. it all comes down to management and thinking ahead... this is an intangible. Competitors Gross Margins such as Westell are very weak compared to EFNT and in their CC they traced part of it to having to buy components at high prices on the market. I believe this loan to ACTM is for 2 more quarters but not sure.]

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