conf call notes:
Avi Bashar:
starts off with a 'this could all be wrong disclaimer'
E. Alyon?
P&L - top to bottom
-product sales 'appear' equal to last year's quarter. but so Korea growth = ~0,
if we elimnate so korea:
q3-98 has 15% increase over '97, ytd-q3-98 has 24% increase over '97
khNote: Korea must have declined considerably, despite what he said.
-licensing: 26% increase over last year's quarter
-growth in gross margin due to move toward licensing
OE: increase due to R&D in 'quite a few products'
tax provision assumes 25%.
'despite world wide turmoil we continue to meet expectations'
we succeeded getting shorter lead times
as result, customers and us have reduced inventories.
this results in reductions in backlog
changed from 12 weeks to....???(didn't say, except that they can deliver orders
taken during the quarter)
another positive change: move towards IP
wrt licensing: participated in dsp convention -- announced Palm.
runs at 450 mips, 2,700 million operations/second..., low power, small size, backward compatible to oak, et al..
is not foundry limited.
-vlsi, first licensee, NOW available worldwide. (does this mean it wasn't previously?)
Q&A
Dan Blake sg cowen (cohen?)?
inventory situation:
Q. -turns at ~14-15 times, sustainable?
A. don't know how you calc'd..., have 24 days' of inventory.
very short, shows an increasing tight/efficient operation.
(could move from 2.2 million to 3.5 million)
Q. has inventory hit for move to JIT been taken?
A. 3 major customers, rescheduling inventories.., moving toward JIT
customers are not changing forecasts in inventories.
-hit started last q, continued this qtr, expect a bit next quarter, by end of
year they should be optimized.
is backlog a less reliable indicator?
A. yes, that is reasonable.
Elliot Smith, Salomon Smith Barney
Q. -in lieu of expecting longer lead times returning, when will it happen
and will you be prepared so that you're not caught with too little inventory?
A. we keep close/constant contact with foundries. will sense immediately any changes.
do not see this as a problem.
-we did not show any reduction in deliveries.
Q, what have you seen as recent changes in ASPs?
A. ASP's continue to drop, and we continue to improve cogs resulting in margins
not being hurt
Q. re: new licensees, what can you say about percentages attributed to this quarter.
A. when we sign a deal, 1 part is milestones (6 months or 12 months) 2nd, get a part
when designed (a part of future royalties) 3rd, Royalties depending on volume
of products shipped by licensee, and 4th technical support of the deal.
***all deals in various stages, this can vary a lot q to q.
***amt of royalties about 15% of total licensing revenues.., doesn't include pre-paid.
Q. again -- does there remain a 'nice unrecognized portion'?
*** 'I was expecting more licensing revenue' ouch!
A. again -- rephrase question: 'do we have big backlog for coming quarter/year?' YES!
Rob Adams for CIBC oppenheimer
Q. can you break out product revenues? specifically, how much is tad, how does
it look going forward?
A. basically, most is related to telephony. must mention we don't sell tad chips anymore.
we sell telephony chips. integrated memory -- system on a chip (telephone on a chip),
all process of telephone. don't need separate micro controller.., includes 'advanced telephony'
this accounts for more than 90%, the rest comes from emerging line of computer telephony
which is basically video conferencing and internet telephony.
Richard ??? from ????
Q. what effect has depreciation of Schekel had ?
A. not a big deal.., expect lower expenses in Q4, more than q3
Q. were you aggressive buyers of your stock when it was low?
A. have continued to repurchase..., expect to finish announced
1 million share repurchase
Q. where do you expect R&D expense going forward?
to continue at this elevated level?
A. developing many projects in telephony - expect level to continue into 4th quarter.
at about 16% of revenue.
Q. opportunities in Japan working out?
A. very good, showing strong results..., growing q to q, for several quarters, don't
expect it to continue at this rate indefinitely, but looking good so far.
Samuel ?? Piper Jaffray
Q. is the change in the dollar/yen rate affecting this quarter? visibility?
A. no effect as sales are all in dollars.
**kh note: this skates the question a bit. A follow up question s/have been
'have you seen increased orders due to your products being cheaper in Japan
since the recent slide in the yen?' oh well
Q. re: not selling tad chips anymore, can you talk about future developments?
A. we received the first orders for voice recognition -- a major Japanese
customer..., first chips will ship this quarter.
-also, in final stages of developing text to speech conversion algorithm.
***application for caller id -- will say the name/number of the caller
applicable to many many other applications.
*** many more developments that we can't talk about.
Richard Roth, Kaufmen brothers:
Q. how far along share repurchase are you
A. about 80% as of today
Q. how much is licensing backlog up compared to June quarter?
A. we are still much more than 1 quarter.., won't give specific number -- about 1 quarter
Daniel Blake, sg cohen
Q. our model shows licensing increasing, is backlog also growing?
A. YES?
=-=-=-=-=-=-=-=-=
So tomorrow will be a test of what expectations actually are. They've hit
their non-reduced estimate, but they've been beating estimates for a while now
so there may be a higher expectation. My sense is that any hit coming from
Korea has been priced in for some time and that this report should be a relief to the street. Time for a relief rally back to old support at 18..??
The bit about 'not selling tad chips, they're telephony chips now' sounded
good, but is suspect since it came in the q&a. I guess this has been a slow
evolution and they just decided today was the day to announce the transition they've been through?
Over all, I'd say it was a good conf call. No they're not immune from the global
situation, but they seem to have enough technology momentum to make up for it.
other opinions/comments?
thanks,
-Kevin |
