Some TXCC DD
Business
TranSwitch Corporation is a leading developer and global supplier of innovative high-speed VLSI semiconductor solutions to communications network equipment manufacturers who serve three fast-growing end-markets; Public Network Infrastructure, Internet Infrastructure and Wide Area Networks (WANs). TranSwitch specializes in the design, development, marketing and support of these networking semiconductor solutions, which we call "Connectivity Engines™."
Competitors
CNXT, PMCS, VTSS, AMCC
Customers
Alcatel / DSC, Chromatis, ECI Telecom, Ericsson, Hitachi, Huawei, Lucent Technologies, Marconi, Newbridge Networks, Nokia, Nortel, Positron, Samsung, Siemens Telecom, Tellabs, 3Com, Cisco, Foundry Networks, IBM, Racal Datacom, RAD, Redback, Sonus Networks, Cabletron, Interphase,
News
WILMINGTON, Del., Jan 19 (Reuters) - Semiconductor maker TranSwitch Corp. (NasdaqNM:TXCC - news) has sued a former executive it alleges took a company confidential report with him when he switched to his new employer, rival Applied Micro Circuits Corp. (NasdaqNM:AMCC - news).
1/18/01 Transwitch TXCC after hours: posted record revenue of $51,052,000 and record pro forma net income of $15,024,000, or diluted earnings per share as adjusted of $0.19, for the fourth quarter of 2000. Reported revenues represent increases of 20% over the third quarter of 2000 and 121% over the fourth quarter of 1999.
- Quarterly total revenues up 121% over fourth quarter 1999
- Quarterly pro forma operating income up 199% over fourth quarter 1999
- Quarterly total revenues up 20% sequentially over third quarter 2000
- Gross margin increased to 71.7% from 70.6% in the third quarter 2000
- "With this quarter, our revenues have grown for seventeen quarters consecutively, and we also have had sequential growth in profitability on a pro forma basis for the last fourteen quarters. Also, in addition to generating $24 million in cash this quarter, we are pleased that our gross margin has increased to 71.7%," commented Dr. Santanu Das, President and CEO of TranSwitch Corporation.
- "We believe," Dr. Das concluded, "that our record revenue and profitability in the fourth quarter as well as the full year 2000 reflect the strength of these end-markets - as well as TranSwitch's strong position in this space. The continued strong book-to-bill ratio and our solid track record in the last four years give us the confidence that we are beginning the new year with positive anticipation."
CC Notes
Harry Lew did most and quite an excellent job. I just added a few pebbles.
* is a new or modifed sentence from Lew’s notes
TXCC CC :
Financials:
51M in gross rev
Rev 121 increase Y-Y, 20 percent q-q
Rev break down (percent)
Sonet 56 percent, ATM 30 percent, Async 14 percent for Q (Note: SONET slightly down)
Sonet 59 ATM 23 Async 18 percent for year
R&D 8.3M, 16 percent in Q in line, expect increase to 20 percent
Marketing and Sales 12.3M except it maintain this level but decline as % of rev*
SG&A 1.7M, 3.3 percent in line, expect decline going forward *
14th quarter of profitability*
230K of goodwill for Alacrity acquisition?*
0.19 EPS of diluted EPS *
Tax rate 38 percent going forward
BTB 1.1
Backlog of 66.5 mil versus 21.7 mil a year ago *
Cash 618 mil up 24 mil in Q
DSO 50 days in line with model
Capex 10.3M for CY2000, 14.7 M for 2001*
50 percent North America, 50 percent international in Q
55 percent in NA, 45 percent international for year
Inventories down in dollar terms. Turn 4.0
Improved gross margins
Recently place 460 million in debt
Strong booking in Q and year
Record Q for design wins
Good growth in all three segments:
Have products in pipeline: Asych has the strongest product line *
Have Framer for T1,T3.
Have ATM order from Seimen in Q4 *.
Cubit 3 (ATM) design wins, multiple design wins, *
Corbra 2 just introduced,
SONET - first series of products,
dominate in mapper market,
Head count up to 331 from 203 year ago
Adding to software group
DS3 is becoming a standard in the Office side*
ASPEN access processor. It's capable of handling cell or packet processing at speeds 622Mb/s in speed *
formed a partnership with Optic for optical products*
Expanding facilities in all areas
Seeing expanding demand in access area, want to dominate access side, seeing DS3 becoming the standard
Invested in wireless infrastructure start up in Israel
Questions
**********
Q: DSLAM? Seimens having success, talk about TXCC products and how they enable Seimens to field this successful product
A: 2 nd generation product, Aspen has features enabled in firmware, With Apen don’t need chips like addition traffic routing *
Q: COBRA 2 AL1 and clock recovery?
A: Circuit emulation becoming a strong element in network, this is only product that has built in clock recovery that meets Bellcore specs. Most of other people have to use other offboard companies for this function*
Q: Seimens 10 percent customer?
A: Mid-single digits. Expect Q1 to Q1 to be 10 percent.
Q: International rev in 2001?
A: North Amercia 50, Asia 20 Europe 30* (transposed)
Q: Redback?
A: Up but mid to single digits.
Q: Top customers:
A: TLAB 16 percent , LU 11 percent
Q: Eclipes customers?
A: no production till end of this year, *
Q: 2G and 3G products?
A: Not able to be too open in this area, * IC4/IC3 start up annoucement in Israel. They have tremendous experience in DSP*. Working on these apps.
Q: Product roll out? OC48 products?
A: OC48 ONIS partner in area. Want product out in Q2. Will roll out higher channel frammer. Then more Aspen then Phast and Cubit product family. *
Q: ATM rev big jump, any competitor or taking share from in house designs
A: no new competition
Q: lead times from suppliers?
A: flat, some supplier 18 to 24 weeks, some 16-18 weeks,no change
Q: DSO up, why?
A: linear Q , but shift to more foreign sales caused up tick
Q: visibility in Q, any change in visibility and end of Q
A: year end backlog triple from year ago numbers, no change in visibility, Q1 is usually weak, looking for 8 to 9 percent rather than 12 to 15 percent as before, need only to identify less than 24 percent to meet turns business?
Q: CA blackout a concern?*
A: No, product from Japan and CO*
Q: Gross margins stronger than modeled
A: could have another 20 to 25 basis points* of upside
Q: interest income coming forward
A: 5 to 5 1/2 percent on cash
Q: Free cash flow number for year, cap ex
A: Cap Ex 10.3 mil, next year Cap Ex 14.7 mil
Q: Top customers TLAB and LU for year, ERICY and NT usually quite high, why not 10 percent?
A: Single digits, did not grow as fast as others, quite pleased at the diversification*
Q: turns business 20?
A: yes
Q: ERICY and NT did they grow Q-Q
A: NT definitely grew, ERICY flat in Q *
Q: New design win and customers in Q?
A: Record design wins in Q all regions and all product lines and customers, traditional slow Q for design wins, record this Q, hard to say new customers as we have all major telecoms and start up already as customers. Had all five major telecoms and new starts.
Q: Async business (T3)flat ?
A: Model is 20 ATM 30 Asycnh,* 50 Sonet, growing in ATM stronger that asynch, ATM is strong but still need asynch (T3 emerging as protocol of change in back office)
Q: Rev growth?
A: High single digits, 8 to 10 percent q-q
Q: Async T1 business? Rebound in business? Other competitors showing weakness due inventory overbuild*
A: T3 area showing lots of strength. T3 backbone of our strength, don't see any slow down,
Analysts and Other
1/17/01 Smartmoney excerpt: Here's the rub: The big new pipes that Applied Micro is helping to build work great -- until the data nears your telephone. They move information at a top rate of 10 billion bits a second; your telephone can receive data at a rate of only 64,000 bits. Think of it as trying to take a sip of water from a fire hose. That's where TranSwitch comes in. The chipmaker's integrated circuits are bought by companies to manage data flow as it moves to users. TranSwitch's key advantage is a product that allows customers to move traffic though
different pipelines. Harrison labels TranSwitch a strong buy based on the potential for its market: To allow bandwidth-eating technologies (like video-on-demand) to reach consumers, considerable spending will be needed. Harrison sees the company expanding revenue 60 percent this year and earnings growing 58 percent. At $36.06, the shares trade at 49 times this year's earnings, in line with its
long-term growth rate of 45 percent.
Numbers
Rev 18.5M to 22.3 to 26.7 to 34.1 to 42.6 to 51.1M Dec00
EPS 0.12 to 0.10 to 0.08 to 0.09 to 0.14 to 0.17
52-Week Low on 20-Jan-2000 $21.25
Recent Price $49.875
52-Week High on 23-Oct-2000 $74.688
Market Capitalization $4.12B
Shares Outstanding 82.6M
Float 70.2M
Price/Book (mrq) 18.35
Price/Earnings (ttm) 138.93
Price/Sales (ttm) 34.07
EBITDA (ttm) $40.9M
Debt/Equity (mrq) 2.06
Total Cash (mrq) $540.2M
Short Interest As of 8-Dec-2000
Shares Short 5.25M
Percent of Float 7.5%
Shares Short (Prior Month) 3.09M
Internet Posts of Note
I would like to clarify your statement - TXCC has made one product ANNOUNCEMENT and AMCC has made 6 product ANNOUNCEMENTS. I dont believe in either case these are "introductions" yet. Secondly, upon further review I find the following - TXCC releases integrated complete functionality products. AMCC releases a receiver, a transmitter, then a framer, then a receiver/transmitter combination, and yeah you guessed it - a receiver/transmitter/framer combination - I dont know if I would classify this as 5 introductions. I will agree that AMCC is on the "bleeding" edge, but for every ONE OC-192 link, there are 129K DS0s and 192DS3s (and 28*192 DS1s). I dont see a single product of AMCC that goes down to DS0. And I think TXCC has an excellent niche here - esp when it comes to DSLAMs. I expect AMCC to grow faster than TXCC too over the next year. And me too am an investor in AMCC, PMCS and TXCC. However my biggest holding is PMCS as they provide "complete" solutions from OC-192 down to DS0. My second biggest is TXCC as I believe the edge hold a lot more volume. 1/12/01 by KSU on yahoo
Our company is designing chips that are true OC-192 (10 Gbps) performance and OC-768 (40 Gbps) performance. Meaning a single channel is capable of the entire bandwidth. There is less hardware (lower cost) and smaller form factors.
OC-12 = 622 Mbps (622,000,000 bits per second)
OC-48 = 2.5 Gbps (2,500,000,000 bits per second)
OC-192 = 10 giga bits per second
OC-768 = 40 giga bits per second
1 Yahoo quote web page with very little pictures = 6K or 6000 bits. At OC-12 1 fiber can support 103,666 users hits in a second. At OC-192 1 fiber can support 1,666,666 users hits in a second ... approximately.
If you have pictures the 6K can become 600K or even 1000K. If you double the users every 8-12 months AND you add more content to your web pages (pictures or moving graphics) you need more bandwidth to get it to people fast.
We haven't even come to the bandwidth required for people to download movies from Blockbuster into the memories of their new RAM players without ever leaving their homes. Will need a 5G memory player (eaisly doable now) but you need a very high bandwidth to your home ... requires a fiber to your home perhaps, depending on how long you want to wait.
Invest in fiber to the home companies 1/10/01 on yahoo by givemeTP
2.5G - 10G are the future. Dataquest and Instat predict this market to be just under $15B in 2004.
622M is NOW. Predictions are that this market is alone $6B by 2004.
155M is also NOW. Margins are quite low here now, but this is a $2B and growing market.
Lastly, you add in ATM and Asynch/PDH to the 622M and 155M markets (for TXCC) and I guarantee it is more attractive in the next year or so.
After that I agree TXCC has to move on and I also agree this will be based on their OneX relationship. 1/10/01 on yahoo by KSU
TXCC owns a large part of Onex Communications Corp. We've explored the relationship on this board before - Onex founders came from TXCC, Dr. Das is on the Onex board, distribution agreements, etc. The Onex product page includes this:
onexco.com
"The iTAP™ products optimize SONET/SDH for data and voice transport, and aggregates, routes, and switches TDM, Frame, IP/MPLS, and ATM traffic from DS1/E1 through OC192 across Layers 1-5 of the network."Perhaps the TXCC approach to OC-192 will be Onex chips. 1/9/01 by sleephound
I only work OC-192 and OC-768 systems so my viewpoint is somewhat tainted towards high performance. I see a tremendous growth boom going on right now in OC-192 speeds (3rd gen silicon). Within 12 months OC-192 will be in the maturity boom phase and the OC-768 parts will be moving from innovation phase to growth boom. OC-48 was bigger than OC-12, OC-192 bigger than OC-48 ... we fully expect OC-768 to be bigger than OC-192. As an investor/trader in TXCC I am somewhat concerned by the lack of new product introductions in the STS-192 arena. R U doing ASSP's with TXCC? 1/9/01 by givemeTP on yahoo
OC-192 devices are selling in the hundreds of thousands per month. In 18 months OC-768 devices with take over that top spot. The margins are in the top tier components ... let's compare margins of a few suppliers next earnings release shall we? 1/9/01 on Yahoo by givemeTP
The low end devices, STS-12 and lower, are termed "access" devices as that is where you and I tie into the "core" or "backbone". The core is the long haul, high speed (OC-48, OC-192) optical fiber lines that cross the nation and oceans that AMCC is establishing itself as a leader in, but it is the access that is the truely high volume semiconductor needs. There are many more access points than there are trans-oceanic or trans-continent crossings, subsequently there are many more players in "access" semiconductors. CY, VTSS, PMCS, CNXT, Maxim, BRCM and of course AMCC. 1/9/01 on yahoo by givemeTP
Insiders
Insiders own 15%
97.6% owned by institutions
About 25 insider sells
Chart
Higher highs and lower lows.
1/19 Blocks: 44/39 pos for day 4. Volume %: 14
1/18 Blocks: 15/10 pos for day 3. Volume %: 14
1/17 Blocks: 43/23 pos for day 2. Volume %: 25
1/16 Blocks: 23/5 pos for day 1. Volume %: 25
Links
transwitch.com
Summary
A solid balance sheet, good backlog, great list of clients, and doing well. If it pulls back into the $30-39 ranges, I would be a buyer. Intraday Friday showed a selloff toward the end.
Jack |
