Robert, thanks for the post. You hit all the main points as far as I recall. Regarding competition, I got the impression that the Scientific Atlanta (NYSE:SFA) division that was sold is not as much of a threat, and that Aeroflex is now their main competition.
I researched SFA's SEC filings, which indicate they took a charge for the disposal. From my distant recall, the company purchasing the division was a risk of not making good on the note. The acquiring company is Global Technology Associates Ltd. My opinion is this company is a weak competitor.
Aeroflex (NYSE:ARX) however, is quite formidable. My understanding is they are getting a lot of work from Lucent. I made quite a lot of money trading the stock last year, and should have bought back in when it dipped back to $7-8 - now around $11 I think.
In the conference call, Aryeh said that ARX's strength is in "fast measurement," and he opined that the RDL acquisition will help Orbit compete directly with ARX better in this area. I too highlighted his comment about the deployment market, but am not sure if this is another ARX strong area of competition.
In any case, both companies are quite small and both are well poised to exploit this growing market - I think there will be more than enough business for both companies to thrive for quite some time.
The biggest impetus for me adding shares on this news was the statement about the growth model being essentially intact, as in a return to 44-45% gross margins soon.
thanks again for the synopsis,
regards,
Louis |
