Conference call notes. {I missed about a minute or so at the beginning.]
Pricing flat --- favorable
First LEAF fibers to Aerie Networks (financed by NT)
Level3 and GLW partnership for 4 years: 10M km for data-rate and metro fiber --- this is an additional to earlier contract.
Photonics, more than 2X, and 15% sequentially. Capacity exp. Are all on track and we are sold out. 4Q will grow 25% seq, strong amplier sales to NT and also to Samsung.
87% in hardware, net income doubled.
Glass. . . laptop sales remain strong.
Adv materials. . semiconductor chips up 150% y/y. New factory running full by year end.
Outlook for rest of year:
We will be detailed and not be communicating further.
70% earnings growth, 1.15 to 1.17 1.7B. .26 to .27 for 4Q.
2001 --- we expect eps up 25%, off-set by Pirelli transaction. Eps 1.40 to 1.43
Optical fiber will continue to be constrained. Next round of capacity expansion not on line till late 2001. This is a 2 year process. Fiber growth will grow 20%. Premium fiber mix will move from 30 to 35% total volume. It will be double the other growth rate.
Photonics will double to 1.9 to 2. billion. Profitability will add 5% to margins. Including sig. Growth from Samsung.
Revs. For 2001, 9.1 to 9.2 billion, gm will be slightly higher than 2000.
Q&A:
Q: Expand on how DWDM ramp is going with joint venture, where we stand with Pirelli. 4Q had 2-week shut-down, what about this year?
A: Will have normal shut-down. Pirelli acq. Proceeding fine. Well along with integration plans. Will close in December. Raising funds this week to pay for it.As for DWDM, ramp continues to be strong. Widespread customer acceptance.
Q: Fiber and photonics business, some concern in other industries on double ordering, how do you work with customers to feel comfortable orders are real and not accessive. Photonics guidance for 25% seq. in 4Q, is that totally due to NT, or is there big ramp in other customers?
A: Double ordering issue, main thing we manage is pipeline. We sell to cablers to sell to operators, etc., what we try to do is get direct info from network providers as to their timing, in order to double check. Photonics seq. growth, we’re comfortable with expectations. It is not just NT, we have new customers ramping more. In addition to some new products.
Q: What are historical lead times for fiber?
A: We don’t do this by lead times. A lot depends on who you are and how much planning you’ve done. As you see by Level3, plans are laid out for 4 years. Does demand still remain stronger than capacity. . . a strong marketplace in this regard.
Q: Optical sub-systems update? Revenue mix in photonics business, optical amplifiers vs. new parts of market?
A: Optical subsystems, esp. wavelength management, we’ve had an exciting quarter for optical cross-connect. SCMR is dev partner. Others are wanting on queue. A lot of anncs out of Marconi and they attribute those wins to our wavelength switch. We’ve been surprised on the positive side re ramp. Photonics side and revenue plans, amplifiers have been the core and will lessen not b/c amplifiers are lessening but b/c of DWDM devices, as well as opt networking device division coming into revenues next year. Mix? Significant component sales, percentage will grow faster than amplifiers. A lot will show up in increased profitability b/c sales will go to ourselves. Lasertron is ramping.
Q: LU’s problems and the impact on your quarter over the past 3 to 6 mos. 15% sequential is good growth but we’re used to higher.
A: Some impact from LU. They were down from Q2. If they had remained flat that 15% would have been over 20%. We are continuing to ship to LU in 4Q. We’re now able to switch capacity to some of our other customers who are sold out in photonics. 4Q we’ll aim capacity at customers who’ve been in line.
Q: What is issue with turning capacity on and off for customers? What are lead times for re-directing it?
A: It isn’t instantaneous, it takes a couple months to shift. We make sure if we say we’re going to do something we do.
Q: Guidance for 2001?
A: CapX in 1.7ish, next year will be in low billion, driven by fiber, LCD, and photonics.
Q: Pirelli, they annc’d 40 gig external modulator with VOA, some are going to ship Q4, 2001, which means components ship in advance of that. Update on 40 gig?
A: 40 gig is product that interests us strongly in the acquisition. It is just one of many modules and components we’re doing as we participate in many 40 gig system deployments. We have a pretty good handle to when our system is going to be introduced by whom. Pirelli modulator not integrated yet, but we’re in discussions to do that.
Q: Not widespread commercialization of 40Gig until Q after. OFC 2001, you won’t be demonstrate modulator?
A: You’ll see demos and prototype shipments until very early 2002.
Q: R&D ramp? Insight on Metro-core product? Is that the driver to 35 from 35%.
A. R&D we use 8% but it is an amalgamation --- as photonics is much higher. Next year we’ll provide more detail. Use 8% overall. 7.1 to 9 billion growth in revenues represents considerable increase. Metrocore is a good percentage. Intro is going well. Large number of customers. Level3 does mention us.
Q: Capacity adds in LCD business?
A: Sticking with market growth of 50% y/y. Great demand. About 85% under long-term supply agreement. Pricing continues. No issues there.
Q: How 40 gig Raman will affect fiber selection, and cap expansion will any single-mode be changed over to newer fiber?
A: 40-gig will sig. Impact fiber selection. Because most of fiber in ground has PMD issues as you move up-speed. The more you increase bit-rate the more low-dispersion fibers become more valuable. Raman also will tend to favor these premium fibers b/c of relative core size as well as distributed optical impact. Builds case for continued new product intros in fiber areas. Faster means sophisticated media. Draw towers, yes, we continue to transfer more and more production into premium fibers.
Q: Fiber growth will be 20% y/y? Also comment on capacity re: photonics and supply – demand equation.
A: Yes we’re looking at KMs around 20% growth. Capacity constrained environment will continue. We’re bringing up towers faster and faster. Photonics capacity catching demand, we keep trying and trying to do just that. We don’t like putting customers in a wait situation. We have been unsuccessful even with all capacity increases. Not comfortable to predict when that will happen.
Q: Increased automated manufacturing in photonics business?
A: One of major plays we’ve been making has been to automate micro-optic production. This is why we have the Samsung agreement.
Q: As we move up in data-rate, PMD becomes more of an issue. What are your plans?
A: Overall dispersion management becomes important. For PMD we have about 3 different solutions for old fibers, and as well we’ve just annc’d a change to LEAF for premium fibers. Dispersion management we are number one. Now introducing compensation.
Q: Level3 KMs and DNA?
A: 10M is the minimum level and does include 2M for 2001. This is less about a supply agreement and more about a revolution. Will lessen bandwidth cost by using their flexible platform. DNA will more than double.
Q: Photonics growth includes Pirelli?
A: Yes.
Q: Products are geared to higher speed systems. Elaborate on other products for 40 gig systems?
A: For 40 gig I could go on forever on all the products here. It is like moving from 2.5 to 10, everything changed. From 10 to 40 it’s even more. You have to handle light-pulse very carefully from one end of system to the other. Brand new ways to do everything: dispersion, etc. I can’t think of anything that won’t change. I guess we’ll dig holes the same way.
Q: On the 25% seq. growth in photonics for Q4, what about expections to LU?
A: Not counting on any significant growth to LU.
Financial performance continues strong. Photonics seeing some good profitability. Key challenge is adding capacity as quickly as possible. We will have favorable mix and pricing. Bandwidth will determine the winners. |
