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Technology Stocks : Aviat Networks

AVNW 23.29

-3.6%

3:59 PM EST

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To: The Ox who wrote (169)	7/30/2008 6:10:05 PM
From: Rob Preuss	of 312

OK. So I listened to the call... Here are some notes: 1) Optus is a Tier 1 company and contributed to the 1.6 book-bill ratio, but the orders booked will be filled over the next 3 quarters. That's why they're saying $188M revenue in Q4 and only $175 to $185 million in Q1. 2) The accounting problem had to do with "system" issues that were active only in one location, but they had nothing to do specifically with that location. Hence Braun said that he would not identify that specific location. (The system handles their US manufacturing cost accounting. The location was a US manufacturing location. The system was scheduled to be migrated to another system and this migration has now been given higher priority.) [I think this points to the problem having been within the old Harris Microwave Comms Division and not within the old Stratex Networks.] 3) The $13-14 million charge was due mostly to sales commissions under the current 2-plan compensation structure. Braun doesn't like the current compensation structure and will be introducing a new unified plan globally that reflects his own ideas on proper compensation. Probably this will mean, in part, that commissions will not be due before revenue is recognized (thereby avoiding the issues we see here, where charges for commissions must be recognized several quarters before the revenue is recognized). 4) Industry growth if 6-8 % while growth in the IP-based segment is huge at 60+ %. As they accelerate their transition to IP-based products we should see revenue and earnings growth accelerate accordingly. Right now HSTX has about 31% of its revenue in IP-based products (up from 28% last quarter, on a TTM basis) and Braun wants this to be in the 60-70% range by 2011. Europe and Asia has adopted IP more than North America has, so far, but Braun expects North America to catch up. 5) Braun has reduced the number of his direct reports to about 9 although not all positions have been filled yet. (Note: I had a hard time counting as he quickly ran through his new executive team so this number might be off by a bit.) 6) Great customer feedback on the Eclipse platform and its a very very robust platform. Its also very power efficient (consumes less than a light bulb) which reduces their carbon footprint and customers like this. 7) Braun has made some hires for his business improvement project. In this project he's trying to consolidate processes and tools... he's also expecting this project to be 80-90% complete by the end of this year. 8) Order momentum is clearly building up. 9) The earnings call has been postponed to an unspecified future date which, hopefully, will be only weeks away.

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