Here's a quick rundown of thoughts after the release, conference call and follow up dialogue:
Series B and E preferreds were converted during the quarter adding to the shares outstanding, but removing uncertainty of knowing when and at what price they would be conerted at. It appears that only the A's (which have a minimum conversion price in the 60's), and the C's and D's (which I understand have some sort of time lock on them).
While I was disappointed in the reported revenues and earnings, I am pleased to see them return to profitability and the tremendous inroads they made with their 3 new products, which is what it is going to take to move this company to the next level. It is clear to me that this company is treading water with their old product line in such a competitive environment. When the new products begin to take off, there should be some mild pickup of old products sales as they may be complementarily added to the orders of the new products. The potential growth in this company lies in the development and successful deployment of new products, such as the IQX-200, Net ARm, and the Gigamux.
The 3 new products, with their tremendous potential are moving along at a very pleasing rate. I was very surprised to hear that they already had 9 design wins in the Net Arm Chip. Just a couple weeks ago, they only had 6. As I mentioned before, when you sell this product as a chip based solution, it takes about 6 months to go into the product, so I expect sales will commence sometime in June/July (they started getting wins in Jan). As I mentioned before, design wins are booked purchase orders! When I talked with the VP of the Net Arm chip last qtr, he told me that his personal goal was to get 50 design wins in 1998. At that time I thought he might be blowing smoke up my butt... looking back now, I guess he was serious!
The IQX is beginning to really ramp up. While resulting reported revenue has not been significant to date, it appears that qtr over qtr, the revenue from this product has jumped about 600%, with the bulk of the revenue generated in Jan. Before getting too excited, keep in mind that there were 3 months to sell the IQX vs the 1 months it was sold in Q3. However, those big players who need to evaluate the product prior to purchase and deployment, have done so and begun to place orders, so revenues should become significant in this current qtr. Also, customers have been ordering systems with multiple T-1s in them, vs just 1 T-1 slot like they were in the products infancy which results in higher revenues per box.
Between $400 - 500 million in gigamux shipments were actually sold in the qtr. I believe these were systems that were tested briefly and a purchase decision was made after successful testing, without the rigourous testing procedure that is necessary by the telcos. Testing of the product by the various evaluators should be coming to a close over the next 1 - 4 months, hopefully resulting in deployment as our first evaluator Brooks is.
Inventory contains $2 million worth of product that is evaluation type product. Basically, it is product that is out on loan.
I just noticed they used a 36% tax rate. I'm not sure why. They should have a ton of tax loss carry forwards.
What is key in my mind and the big news that I and many others have been waiting for is the confirmation of the Gigamux's quality. This was accomplished by Brooks approving the product for use in it's networks and have indicated that it will be deployed in the other large cities. In addition, you have Real Time Center in Switzerland having great success with the product and adding it to thier list of approved products. This deal was brought to us by Merisel, one of the major networking distributors in the US and throughout the world. I'm curious to know who else they are introducing the Gigamux to! And perhaps the biggest of all the news is the teaming arrangement/joint marketing agreement with a mulit-billion electronics firm. This eases one of my concerns about FIBR's ability to take on numerous large size GigaMux orders, as I believe that such a large corporation would be likey to work out favorable financing arrangements if it should benefit both the companies.
My take on tomorrow is that we might gap down slightly at the open on Motorola jitters and the shortfall on earnings, but I think any selloff will be short lived with the news of the Gigamux looking so promising.
Enough for now... I'm exhausted! |
