I just finished listening to the presentation. There is an "instant replay" available for a limited time. I strongly recommend that anyone really interested in this company should take 30 minutes to listen, and to look at the associated slides. You can find the replay by visiting the STXN web site at <www.stratexnet.com> and surfing over to the investor section.
It was a very interesting presentation.
Carl Thomsen (CFO) starts out with a broad overview of STXN (20 years old this week) and its traditional market... noting that the digital radio market has stabilized while minutes of use (MOU) in mobile networks continues to grow at a 38% annual rate. Carl also points out the competitive position of STXN; in terms of units shipped during CY02, the players are Ericsson (70K), NEC (43K), Siemens (33K), Nokia (28K), Alcatel (27K), STXN (20K), Harris (15K), SIAE (15K), Nera (5K), MNI (4K), Sagem (3K), PCOM (2K), Marconi (2K), SAF (2K), and Ceragen (1K). [So STXN is the biggest of the small guys... or the smallest of the big guys... and from an investment perspective, its notable that none of the bigger players are a "pure" investment - so they tend to have a more limited upside potential.] Carl reviews where STXN's financials have been recently along with the fact that the company's cost structure has been dramatically reduced these past few years.
Then Carl moves on to the future. Pointing out that their gross margin targets are 30% over the next 12-15 months and heading toward 38% in the longer-term (vs 19% currently). That is expected to translate into operating income which is 1% of revenue in the next 12-15 months and 15% of revenue in the longer term. Carl then turns the talk over to Chuck Kissner (Chairman & CEO) to discuss the new Eclipse product... which is what will drive their future growth.
Eclipse is not just another microwave radio. In fact, they don't call it a radio at all. They call it an Intelligent Node Unit (INU). Basically, an INU is a part of a network that consolidates the functions of many other boxes that are currently sold separately. In addition to providing the transmission termination function for microwave radio links (one still needs the separate "outdoor unit") it will also provide transmission termination for wired/landline links... but that's not all, in addition to transmission termination, this box provides routing, multiplexing, cross-connection, bandwidth & speed control, and power management. Moreover, it does all this in one sleek box that requires only 2 rack units of space (vs current solutions which use multiple boxes that are patched together by a rats nest of cables and which require 16 rack units of space). This consolidation of functions also means higher value to the customer through lower initial cost and higher reliability (which, in turn, translates into lower recurring cost through reduced maintenance). We can now really see that STXN is becoming the "network equipment" company they promised to become rather than simply a supplier of digital microwave radios.
The design of Eclipse is pretty clever. First, it is modular and may be configured in various ways (to meet different customer requirements) simply by installing different boards... moreover, those boards may be installed either at the factory or in the field. One board common to every INU is the Network Control Card (NCC). The NCC is software-configured via compact flash memory; this enables the company to sell software upgrades (licenses) after the initial sale... these licenses unlock additional features and functions (such as the ability to support higher bandwidth links) that are already built into the product. The NCC connects over a TDM bus to Radio Access Cards (RACs), which terminate radio links, and/or Digital Access Cards (DACs), which terminate wired links. One benefit of this modular, software-configurable, architecture is that the company can drop-ship the hardware directly to the customer and then (remotely?) configure it via the compact flash memory. Finally, its worth noting that Eclipse can be used as a pure data transmission system or it can carry both data and voice traffic over a common transmission link.
The first Eclipse prototype was built in Jan'03. They locked in the design (and received their first product order) in Aug'03. In recent months, they've received numerous certifications and conducted a pilot production build, so they are confident they will make their first commercial shipments (and book their first revenue) in Q1CY04.
That concludes my synopsis of the presentation. Eclipse is clearly the future for STXN and, given the value proposition this new product offers to their customers, I think their future looks bright. |
