I have listened to the conf. call:
Here is one man's perspective. The overall tone of the call was subdued. Major blame was on industry weakness due to previously stated issues(10/100 price declines, uncertainty re product standards,etc), with a new issue of continued weakness in the Enterprise market(for all vendors, not just networkers).
To be conservative, Bay is now treating this qtr as the baseline rather than an abberation. Therefore, rev est going forward are built on the $547MM. House did agree with one analyst who asked if 10% sequential growth in current qtr was reasonable. That puts Bay in the $600MM area, not the Dec qtr level of $645MM previously forecasted.
The "good" news, is that about half the analysts asked questions about the Accelar line. Here, Bay's tone and info was very positive. They said that those sales were within the original range forecasted of $40-60MM. They said it set a new record for the sales of a new Bay product in its first full qtr of availability. I am hoping the analysts' focus on this line, and the positive news, is an indication of their willingness to look beyond the current weakness and see the future potential of Bay.
They also said things that lead me to believe that they did not pump the sales at the end of the qtr. In fact, Bay said they asked the Channel to hold orders in the last week to better reflect their true needs for customers rather than fill the pipeline. These orders did ship the first two weeks of April. The CFO said sales in April so far have been "good, not great". I guess that means the overall weakness continues.
Re Accelar, Bay said conversion rate has been very high. An analyst asked if it was in the 50%-75% range and Bay did not disagree. Bay said the conversion cycle for those who did convert was in the 8-10 week range. However, they said part of this was because these earlier triers had a 90 day evaluation period and thus no incentive to commit early just because it was the end of Bay's quarter(a point I made in an earlier post last week). They said more recent eval units are likely to convert sooner. They also said many customers are jumping right in and buying without getting evaluation units.
Finally, one analyst asked why House is so confident in sequential rev growth in current qtr. He said that is based on the continued success of Accelar line, seasonally strong qtr, full qtr of shpts for new products introduced late last qtr, plus new products coming out this qtr.
IMO, I think the market will react much as the Briefing.com article predicted: Drift down due to revised earning est for next qtr and 1998/99, but holding in low 20's due to the promise of Accelar showing signs of being the real deal. The report from Cisco next month will put the truth to the premise that the primary issue was industry weakness versus a runaway Cisco train. In this case, I think a weak Cisco report could actually help Bay by confirming that it is not a company-specific problem as has been typical with Bay in the past.
Going forward, I think there is a possibility to some upside to the June qtr., IF Cisco says current qtr was weak but got alot better in April. This would be an indication that industry is recovering. The Sept. qtr will be key because it comes right before the Annual Meeting and ends when LU can make a pooling of interest acquisition. Don't know if there is anything there, but certainly want to see Bay report a strong qtr for Sept so we don't get bought on the cheap.
I hope to see other's take on the conf call. I have obviously been overly optimistic before.
Talk to you all tomorrow night.
Paul |
