The following is a review from Howard Bubb (CEO) on the market and
product position of DLGC: Products = DSP boards; middleware software;
network interfaces. They have the largest client base in the world
which is derived from their position in the standards arena (ECTF),or
Enterprise Computer Telephony Forum. Their leadership position
requires them to push standards into the Telecom world which is new
for this industry which has traditionally been proprietary.
Fundamentally telephone networks are ubiquitous and are the means by
which everyone communicates,(wireless;wirelined;digital;analog).
People will need access to computer based information by telephone
using DSP building blocks. DLGC makes OPEN CT possible by providing
the core boards. Applications include: response;messaging;
connectivity.(i.e.virtual banking;paging;compressed voice messaging;
any type of interaction with computers via phone. One third of the
time world wide, DLGC is the technology inside of the systems. Market
share leader;standards setter;best technology. The CT market in 1996
was about $6 billion. By the year 2000 this industry is expected to
have a 30% to 50% CAGR. There are 3 driving factors benefiting DLGC.
The growth of the Computer Telephony area;the erosion of proprietary
vendors and the convergence of the telecom sphere to open systems.
In 1996 the industry was in the high 50% range of open vs proprietary
systems up from 55% in 1995. DLGC has 60% of the worlds open systems
business. The open component market is about $350 million and DLGC
has 60% plus of the market. Deregulation is driving the change to
open systems. On a recent trip to Europe Deutcha-Telecom/Deutcha
-telepost is pushing to open systems. Because of deregulation in
Germany, they have to bring solutions to market much more rapidly.
MCI is pushing their vendors to go to open systems. Clients are tired
of buying proprietary boxes that have to be thrown out. They want
their CT infrastructure to be as extensible,flexible and programable
as their computer infrastructure. In their computer infrastructure
apps are rolled out in months and in their telecom infrastructure it
takes years. This is driving the convergence of one flexable,
open, and reprogramable system. Now with UNIX and NT 4.0 it is
possible to deliver very robust open systems platforms. When joining
the internet to the public phone network CT is HIGHLY relevent.
DLGC's products allow people to move information from computer
networks to the phone network. The market segments are: workgroup;
enterprise; highend, and service providers. The market trend in CT
is moving toward larger and larger systems. DLGC did a 40,000 line
system with MCI last year, and recently showed an ATM backbone open
system running at over 10,000 lines. Motorola is deploying DLGS's
product for internet gateways. Gateways are in field trials at
Telecom New Zealand;and Korea with MCI. Also, MCI's new Call center
access product known as vault is based on DLGC technology.
Unified messaging is also critical. People now want their voice,fax,
e-mail or any kind of messaging integrated. DLGC allows clients
implement very advanced messaging systems that improve productivety.
Another large opportunity in the Telcom space is to build complete
switches based on open systems technology. They announced an
aggreement with Rockwell that their next generation ACD will be
entirely based on DLGC open systems technology. A company in Japan
is building a next generation PBX on DLGC technology.
DLGC products enable a client server view of Telecommunications. This
is a very fundamental shift. People are buying CT servers and then
buy applications to run on them.
DLGC is the only company that covers everything in the signal
computing domain of voice compression storage processing. They are
in over 50 Countries with Digital products and over 70 countries with
analog products. They also have products to integrate legacy switches
with the network. They have over a 60% market share in DSP operating
systems. Texas Instraments recently announced that they will be using
DLGC's SPOX operating system on all of TI's volume DSP's with a new
program called SPOX BIOS which TI will be standardizing on. They have
the technology from the DSP's through the algorithms up into the end
systems. This allows them to develope larger and larger systems by
controlling this technology. They are already leading in terms of
size with their SCSA standard going from 1000 port systems to 2000
port systems. Now they are pushing into the 4000 port range ,and with
distributed networks can reach 10,000 ports. Dualspan supports 60
channels of processing in one PC slot. They have just announced the
quadspan product with 120 ports in one slot.
The DM3 architechture is in trials currently, and doubles the anti
for the market and competition. This involves media-streaming from
the internet out onto the public phone network and back. DLGC is
leading in density with 60 ports per slot and 300 MIPS per slot. DM3
will take them up to 1,800 Mips per slot and doubles the density. DM3
increases scalability because it is programmable. DM3 allows clients
to buy product from DLGC and do extensive reprogramming of their own.
This results in faster times to market,penetration of new markets
where proprietary vendors can switch to DLGC products and incorporate
much of their own functionality on DLGC building blocks. They are
delivering DM3 directly in 16 countries currently. They have
distribution in many other countries which is a requirement of the
multi-nationals. DLGC is the only CT company with global footprint.
Leading applications in internet telephony are voice and fax. DLGC's
gateways take voice, stream it over the internet, and reconstruct
voice on the other end. They are first to market with voice and fax
gateways. They have over 500 low end gateways that run 2 to 8 ports
deployed in production environments. They are in trial with very high
density T1 & E1 gateways with several Telcos and Erricson. They are
also in trials with several other telecom equipment company's. They
support G.723.1 & H323. MCI has announced a internet call center
called Vault that will alllow someone surfing the net to click on
an icon and be connected with a sales representive from the
respective company's home page. MCI purchases the technology from
DLGC and will be providing this service to many large companies as
internet commerce begins to ramp.
Sorry, to all but I have to go, my wife is a little upset. Too much
surfing. I will post an extensive quarterly review on the 18th after
the close.
As always, I'm very long DLGC...
Happy Investing,
Jay |
