CIEN CC Notes from Ragingbull.com:
Initial CC notes
1. Strong demand by certain customers.
2. Highest concentration of total customers.
3. Two 10 % customers. Both were North American. Both included 52 % of total Revenues. Previously were 63 %. international was down and 13.4 % .
4. Core Director > 10 % of total revenues.
5. CoreStream related revenues increaced from last quarter.
6. OC-192 and OC-48 increased.
7. discussed use of proforma net income. discussed that Proforma net income was 75 million than GAAP net income. Failed to mention that GAAP net income was actually a Net Loss.
8. working capital increased 1.2 billion.
9. inventory increase came in area of finished goods. Longer trial and instillation of core director. also some order delays and shipment reassignments. According to Ciena this is not a concern.
10. headcount is 3860 or increase of 21 %. Includes about 270 Cyras employees. In contrast to rest of industry, Ciena continues to hire.
11. seeing customers slowing down orders. mentions that not immune to environment , but, better positioned than others. sees move towards spending on next generation versus legacy products.
12. seeing increasing evidence that open architechture is taking market share from closed architechture systems.
13. market share in Long Haul being taken from Legacy.
14 . Metro has 9 customers in quarter. Ciena believes metro has opportunities. Cyras fits into this mold as it is forming the Metro Switching Division. Cyras K2 platform is ready for minimal shipment. Has a signed contract with Level 3.
15. Core director has been shipped to 15 commercial customers. Trial base should expand. CoreDirector is early in ramp, revenue recognition criteria of Customers may make CoreDirector less than 10 % of revenues in a future quarter. Expects CoreDirector to be greater than 10 % for Fiscal 2001.
16. Pricing concessions by competitors are possibly causing uncertainties in gross margins.
17. Confident of future and positive of Ciena's postion in optical networking.
18. seeing customers taking dramatic pricing pressures. This could decrease gross margins by 100 basis points.
19. expects K2 to cause gross margin pressures until volume picks up. expects K2 revenues to become reportable in Q4'01.
20. 3rd quarter will show a full quarter of full Cyras expenses. Sales and marketing expenses will be 10 %, R&D 12 % and G& A (i missed this). Suggested raising cost parameters in models. also mentioned to watch the extra shares.
21. sell side eps is about 0.73 for F2001. Based on guidance they expect eps for F2001 to be $0.72 to $0.75
22. F2002 guidance over F2001 should be between 45 - 65 %.
Question and Answers.
23. Sivlerstein from Robbie Stephens : Ciena says CoreDirector has 15 customers. Sileverstein asks about competition for CoreDirector. Ciena says little competition, maybe Tellium so far. Looking to max sales during this low competition period. K2 revenue wont be disclosed on level 3 deal.
24. henderson from SSB ..... vast majority of CoreDirector sales is replacement of legacy systems,from ADM's to Cross Connects. Transport pricing pressure is longer haul transport. Pricing of Metro other than CoreDirector is showing potential pricing challenges. CoreDirector is seeing no pricing challenges, yet. Long Haul vs Metro is not split up. Yet Metro is NOT 10 %.
25. Dain Rauschler.....OC-192 on transport has about 10 customers. Looking in crystal ball for Long haul vs. Metro. Metro should be 10 % or a little higher moving forward.
26. UBS Warburg......10 % customers had no new ingredient. Therefore we can conclude that 10 % rs were Qwest and Sprint (my guesses not in CC). Long Haul and Core Director grew about 20 %. Metro was flat. Long Haul doing great. Long Haul is primarily new systems and not necessarily channel adds.
27. Goldman Sachs.....major long builds will not be disclosed in this CC. Much of this from North American perspective is in public domain. CoreDirector has great synergies with CoreStream. This is showing traction on transport side. With CoreDirector and K2 they can provide a full solution for integration. Integrate network management, point and click at edge of network. Network management in June for CoreDirector. Then later in year software will integrate with K2 for Netwrok management.
28. didnt get analyst.....doing very well in North America. Should be more balanced in 2002. Looking for Asia growht in future. (personally, it sounds as though international was disappointing....those are my words). Cost analysis with carriers in all optical are proving to challenging right now, but these are early days.
29. Morgan Stanley.....not seeing lots of pricing pressure on OC-192, believes that Ciena offers a robust OC-192 system, hence pricing is stronger than competition. OC-192 components are showing deflated prices, which helps margins.
30. Bank of America.......most of Europe is SDH. CoreDirector has full SDH compatibility and integration. Large market opportunity, hasnt hit the market, has infrastructure in place in Europe and would like to leverage off that.
31. WIT Soundview......high channel count landscape hasnt changed much . Nortel is talking about open architecture and high channel count, yet, we arent seeing shipping yet. Outside of Nortel, not alot of competitors, perhaps to a lesser degree Alcatel (hinted seeing them in a "larger account" of course that is Sprint...again, my words.)... Customer acceptance for CoreDirector is 3 to 8 weeks (sometimes a little longer).
32. Lehman Brothers....Dynegy is PanEuropean substantial transport build. Finished Goods is about 122 million, very consistent with first quarter. Vendor financing landscape hasn't changed much. perhaps seeing less pressure of vendor financing due to environment. Vendor financing is not a selling point by Ciena.
33. didnt get analyst.....asked about Tellabs competion with product 6700. Ciena said Tellabs well entrenched with RBOC's , but not seeing as a major player right now. Cross Connect and ADM replacements with K2 integration and going further to edge of Network becomes very valuable. Push outs occured since end of quarter and through today nothing has changed.
34...Ambro.....gross margins for 4th quarter should be higher than 3rd quarter, perhaps due to higher volumes of Cyras K2. Value of CoreDirector and K2 integration is valuable worldwide. Where is high channel count competition expected to come from . They just don't know since they are not seeing any evidence of Nortel and Alcatels high channel count claims. Ciena stated that if pricing was not economical they would turn down long haul opportunities.
35...DBAB , Raj Srikanth(my favorite).... capapbility of CoreDirector and scaling will meet all needs of customers. K2 is targeted at financially healthy customers, not looking for Clecs, compared Cerent (CSCO) with different customer base.
36. WR Hambrecht.....Ciena will emphasize complete offering ....Level 3 and Sprint are taking multiple products. Majority of major customers are taking multiple products. Most of large customers want to limit vendors. Ciena is becoming a top 3 strategic providers. Less competition from point providers. no need to sustain relationship from weaker supplier. Less about pricing more about offering solutions that work. Ciena offers best of breed solutions, gains opportunity because of base to show these products.
37. Tom Weisel.....newer items of 10G components are coming down in price. They look to work for vendor relationships in riding this pricing situation of components.
38. McDonald investments.....asked about Qwest, number of cities, how is deployment working. Ciena will not comment on detail of Qwests architechture. Indicated that Qwest uses multivendors on all optical deliveries.
39. Merrill Lynch (Michael Chin)...Ciena wont comment if both 10 % customers will end up as greater than 50 % for F2001. Chin indicated that Ciena goal was to reduce reliance on customer concentration.
40. missed analyst......3 discreet component parts of metro space, which Ciena does via CoreDirector, CI and K2. This gives the complete portfolio. ONI is gaining share in metro, yet, intergration and customer base is much larger at Ciena. Focus by Ciena is only looking at tier 1. Asked if Sprint has added second source of transport. Ciena said "ask Sprint ".
41. Seth Spaulding , Epoch Partners.... asked about long term supply agreements and if so are they being renegotiated. Ciena explains that they aren't concerned with lock ins because they have great vendor relationships. (my words,,,,looks like Ciena jumped over question and would not give answer).
42. Dressdner......TyCom will be a revenue generator in Q3 and Q4. Visibility was asked about. Ciena claims they maintained guidance moving forward. Visibility for Q3 and Q4 is not as good as it has been, but good enough to reiterate the 95 - 105 % growth going forward.
43...missed analyst....asked about other assets on balance sheet. Warranty costs and spare inventory. (hmmm, need to keep eye on this, 10Q might tell). These spare parts are not available for sale, hence not included in inventory. |
