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Technology Stocks : Orckit (ORCT)
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To: John F. Dowd who wrote (1354)7/22/1998 9:38:00 AM
From: SoMo  Read Replies (2) of 1998
 
[revenues and margins]

Hi JFD. I suppose you meant to post revs $10,913 vs $9,381 cost to make for Q2/98 (and not $7,683 which was Q2/97 earnings).
You should know that till the company achieves its "milestones" in ADSL cost reduction, the bigger the share of ADSL products in the overall revenues, the faster the manufacturing costs will increase.
The reason for that is that Orckit actually is forward pricing on sales to GTE (negative gross margins) and maybe also on sales to Telia (maybe not negative GM, but sure very low). This was explicitly exposed by Tamir at the CC.
Last quarter ADSL sales almost tripled agsinst the first quarter of the year and now ADSL sales are accounting for about 30% of company sales, against about 10% last quarter. This explains the slump in gross profit.
Tamir sounds to be very optimistic and confident about the company's plans on "cost reduction through technological improvements and standard learning curve". The next big milestone is the new ADSL chipset (with Fujitsu MicroElectronics) to be ready in Q1/99.
There is also HDSL2 (with Rockwell) which is to improve gross margins on HDSL sales.
It looks like investors are waiting to see this optimism come into reality. My personal view is that the company will meet its plans on time.

Bye SoMo.
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