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Strategies & Market Trends : Technical analysis for shorts & longs

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Nov 19 4:00 PM EST

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To: Johnny Canuck who wrote (34755)	10/16/2001 3:11:44 AM
From: Johnny Canuck	Read Replies (1) of 68145

ADTN CC Part 2: Q: Targets looking for ADTN to break into new segment: G.HDSL services. A: No firm goals yet. Working with carriers. Carriers looking for customized interface and control software. Process takes longer. Should be interesting market segment. Q: Given Q4 guidance. For 2002 85 cents for year. Are you comfortable with that guidance. A: Next year depends on the market conditions. If it stays flat no increase in profits. Do not expect it to decline either. Do not expect it not to grow. With 500 mil capacity and currently running at 400 mil. So increase will generate better profits. No way to really predict. Q: How will GM get back to 50-55 percent level. A: Need to get back to using all capacity. Currently under capacity for demand side. Higher volume equal lower costs. Q: To get back to 500 mil level, will need to re-hire people. A: No, only let go 100. Need few extra people to get 500 mil. Q: T1 circuit growth? Pricing? Enterprise T1. Still growing? System rev up, product growth by segment? A: T1 line growth flat. With all product have a constant declining ASP's. Rev declining as a result. In Q3, decline in ASP's as well. Short term effect. Should be over soon. Expect GM to return to old levels. T1 flat to slightly down. T1 in enterprise the same. Taking market share in some areas. Growth in enterprise in T1 50 percent. Has not declined aas much as entire market especially carriers space. Pricing satisfactory in systems area. Cycle time of systems products is long. In some areas it has taken longer to grow than other areas outside systems. Q: 40 mil in enterprise rev, what percent of that is sold to enterprise as opposed to distributors. A: More content to direct sales. Do not have figures on hand. Q: Mix of HDSL 2? Mix of HDSL with second cost reduction design? Affects on margin? A: Second gen at 80 percent???, last Q 90. This Q not quite 100. Mix of HDSL 2 not significant in product environment as effect of reduction of rev in Total Reach product. Q: HDSL carrier inventories? A: At normal levels. Manufacturing time reduced in the last few months. Cycle time down significantly. Inventories not just about to just in time levels. Q: Change in IAD market? Change in customers since CLEC's are gone. Wireless market wins? In back haul market? A: Wireless and IAD are different markets. No wireless capability in IAD yet. IAD in enterprise is a growing market. Significant new customers and rev. New products on-line. ADSL interface with ATM technology for IAD in last 6 months. Want this for future but right now carriers want IAD with TDM over T1. Those looking to buy are looking for rev to day. No worried some much about advanced futures. Added TDM and packet technology 6 months ago. Seeing strong demand. No in wireless back haul market except for spread spectrum product sold in Intl market. Q: What factors effected ASP erosion Q-Q? Down 2.5 percent on GM. A: Looking at Q-Q trend, with the large number of products and mix you need to expect some up and down. Q2 mix was perhaps too favourable perhaps. Q3 was not unfavourable in our view. System business in Q2 may have tilted results. Q: Channel sales. Recognizing rev onm sell in or sell out? A: Recognize rev when product shipped to distributors, sell in. We and they monitor inventories very carefully. With channel partners we continue to gain share. Channel centric business. So far we have not trend of carriers going direct to us for most of sales. Q: Clarify GM for enterprise vers carriers? A: No ready yet. Never done in conference call. Expect trend to be consistent. Do not expect spikes. Q: Any idea of run rate to get to GM of 55 percent? A: No idea. Less than 500 mil. Q: Any 10 percent customers? A: No comment. Q: 250 mil Buy back? A: Only addressed in 10Q. Q: DLC business update. New trials? When new business? When significant sales? A: Some trials. No public comments. Lengthy testing period. Please with results in area. In next few Q's (1 or 2) will probably say something. Will have revs next year perhaps. No significant rev this year. Will be a significant issues next year. Q: IAD strong. Netvant product strong? A: Announced total access IAD this Q. Made progress with non-ILEC customers. Netvant announced late in Q. Seeing interest. New products allow us to gain advantage over weaker companies. Q: CLEC business as percent of sales? A: Too early, but 20 to 25 percent range. Q: HDSL 2 vers HDSL 4. Mix? Q: 70 percent of 2. Q: Some stable CLEC's not so stable anymore. Health of customers? A: Market going forward, will look at a customer by customer business. No worries currently. Will monitor issue. Looking at customers and looking at sales to them. No financing and will not finance. Will spent more time evaluating customers. Q: Intl 3.4 percent of sales. Going forward? A: Lump in Intl due to look rev base. Current Intl percent, have business in hand that will improve that number substantially in 2002. Australian contract. Expect company to buy more than one product. Q: T1 by cellular. T1 by ISP. T1 by corporate. Any areas of weakness? A: No idea. Q: What segments are you making share gains in? New players? Player disppearing? A: Looking at peak to valley rev declined 15 percent. No direct competitor to ADTN that has not seen a greater than 15 percent decline. Coming out of the recession, will have fewer serious players in our product areas. LU and NT were competitors. Both are divesting in product areas ADTN competes in. They won't be there after the recession is over. The larger players are leaving in purpose. Smaller concerns will be forced out. Market re-bound will make ADTN a stronger competitor.

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