Very low turnout at the ASM, considering HQ is located here in Silicon Valley. (Good thing they only rented a small room at the Fremont Marriott.) Only about 20 people, including company officers...I hope this doesn't reflect current interest in the company, as Avanex looks to me to still have a great future.
Nothing much new here, of course, as shareholder meetings are mostly a formality. They do, however, provide an opportunity to meet and question management. (Most questions were responded to buy CEO Engle.)
Highlights:
Capital spending on optical equipment “continues to drop”, with no clear indication when turnaround will come. No comment, of course, on 1QFY02 earnings forecast. (At least, no mention of 9/11!...)
Industry consensus is widespread 40Gb deployment has been pushed out by one or two years, to 2004. Consequently, priority is now on 10Gb and being ready for buildout in Metro area, which is “virtually untapped”.
Headcount cut from peak of 1200 to approx. 500.
R&D spending "being maintained despite drop in revenues”. Plan to stay in forefront of technological advancement, doubled patents in FY01.
PowerMux NxG and PowerShaper 10Gb on track for commercial testing by end of the year. (I had PowerMux NxG as planning to ship 3rd Q, I don't know if this is a delay.)
32 customers in FY01, 5 greater than 10%, including Alcatel, Cisco and Fujitsu. (Cisco became 10%+ customer in 4Q.)
No indication if and when Cisco will accelerate incorporation of Avanex products into its lineup. “Cisco probably doesn't know for itself right now.” (Got impression they would like to emphasize prospects with CSCO more, but restrained by non-disclosure agreements.)
Continuing to streamline operations to facilitate automation, working with 2 partners to outsource manufacturing to China. Transition should be complete by end of current FY (mid-2002). Will be prepared to ramp up very quickly, as company expects turnaround to happen rapidly once confidence returns.
Re cash burn goal of under $10 million: Sounded like this was already achieved. With $200 million in cash, company has "5+ years of cash". Preemptive action to weather even an unexpectedly prolonged downturn, not expecting further budget cuts to be necessary.
Asked to comment on Lasercomm and HOM technology as potential competition, Chairman Alessandrini didn't seem to be aware of it. (Tinker? As knowledgeable as you are, I can't believe you know more about this than he does!...) Consider primary competitor to be JDSU, alluded to niche players attempting to take market share from Corning and fiber-based solutions to dispersion compensation.
No mention of future all-optical network, although a couple of Gilder reprints were included in info packet. (I'm sure they want to emphasize focus on short and mid-term, and not appear pie-in-the-sky!)
Telcomonster: Hope this covers most of your questions. (I didn't ask why individual investors should invest in Avanex “rather than another similar company - Essex, Corvis, ONI etc.” - as it seemed a bit inappropriate & I knew would get a canned response. I'm sure you've done your own DD...
Ironically, I forgot to put forth a question re my only real short-term concern: With AVNX shares hovering near book value, what precautions have been taken to prevent a hostile takeover? (I recall their agreement with Fujitsu has some provisions in this regard.) Does anybody here have anything solid on this?... I'll try e-mailing IR.
-z. (long AVNX)
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From yahoo.com, does not look like there is much to get excited about for earnings tomorrow. Resignation of NUFO CEO puts a dim light on the sector in general, given that NUFO had comparable prospect to AVNX, lots of cash, a product needed for the next generation of networks, a product that should reduce operating cost. |
