To All- I listened to conf. call. It ran 35 minutes in presentation and another 35 min for Q&A. This is my takeaway:
1. Switching was up strongly, with Accelar growing sequentially from $45MM to $77MM. Switch growth excluding Accelar was still up 17%.
2. Growth in North America was very good and offset some weakness in Asia. Europe was about normal, or just alittle better than normal.
3. Shared media continues to decline as an absolute and % of revs. It was down 17% this qtr., and equal to 22% of total revs. For comparison, switching was 36% and routers 24%(and Remote Acc was 8%).
4. DSO's and inv. turns were both improved vs last qtr. DSO's are down to 50 days vs. 55 days and inv. levels are down to 7.1 days vs. 7.8 days last qtr.
5. Book to Bill is no longer a useful measurement for Bay, per House. The move to produce more to customer orders vs. filling the channel pipeline makes this B to B measurement misleading. They now use something called "Net Installed Revenue". This basically reflects sell-thru revenues. They can see about 70% of end sales now, so it is a relatively good number. Channel inv. look to be about 7.6 wks; good.
6. Current qtr is historically weak, particularly in Europe(the whole continent takes the month of August as a holiday!). However, still expect moderate rev growth and about a 2 pt improvement in margins.
The Q&A section had a few common themes.
1. Lucent- More than one analyst expressed concern/interest as to whether sales to LU have dropped off since NT merger announcement. The answer is no. However, House did note that LU's "string of pearls" strategy of acquiring small companies that fill product gaps means that down the road some sales could be lost as LU begins making products in-house.
2. Accelar- Many analysts were interested in the dynamics of Accelar sales. Eg., changes in revs/port, channel inv. etc. In net, Accelar channel inv. are up from last qtr(when there were none due to ramp-up), but still about only half of what would be normal. The differences in revs/port this qtr to last is due to the introduction of smaller models of Accelar this qtr vs the Godzilla version last qtr. Re Layer 3 competition, House said that we are still getting into Cisco accounts, but obviously those accts are now looking at cisco solutions also. Also, most accounts are in the middle phase of adding Accelar to their systems(ie. on the edge, not in backbone yet).
3. Pricing- By segment, Bay expects little additional pricing pressure in the shared media area. LAN switches had big price cuts last qtr(ie. BayStack 350), and somemore will occur in the future, but not as dramatic. The most competitive segment where it is very hard to make money right now is Remote Access.
SUMMARY-
Overall, I think the results were good, with the rev growth more than offsetting any perceived negative of not beating eps numbers. The conf. call went well, in my mind. IF all goes well, this will be the last BAY conf call, with their hopes that the merger will finalize in early Sept. This is dependent in large part on Gov't approvals, particularly in Europe.
I would be interested in others' perspective on the conf. call.
Paul |
