Just got off the conference call and the bottom line is that the
reorganizations have positioned ODSI to return to profitability in
1999. This is a best efforts to summarize the call. Any personal
comments will be bracketed so they dont get confused with ODSI
statements.
1. 1998 was very competitive in the LAN area and this market is
declining for ODSI. Lost share and had to make changes.
2. 1998 will absorb restructuring charges. Did not quantify any
numbers. Said we would have to wait for 4Q report later this month.
Restructuring equals -- employee termination packages, inventory
write-downs, fixed asset write-downs due to acquisitions, and some
other stuff. (I would write off as much as I could. This is a one
time opportunity to clear the deck for a 1999 takeoff. I would be
focused only on issues going forward though I am sure their 1998
numbers will not be totally discounted by the street.)
3. Discussed products developed in 1998 that will be positive in 99.
Focused on security software and high performance networking products.
(Remember they just got Gov't approval to export their security
software to customers in 42 countries. Security (also known as
intrusion) software is key for Internet E@Commerce since it creates
firewalls, etc. Think in terms of software that protects your credit
card number when you do business on the Internet.)
4. Focused on alliances and partners. Mentioned SGI, STK, CPQ, NCR,
and others who will remarket or OEM ODSI products. Discussed SAIC
Corp alliance (private company, SAIC is not a symbol).
5. Discussed outsourcing tasks to suppliers to reduce expense. Also,
reduced number of suppliers to get better volume discounts.
6. Spoke about shipments of new products in 1Q 99. Mentioned deal
with Los Alamos (probably an SGI deal with ODSI high performance
switchs and security software).
7. Emphasized cash on hand, no debt, reduced cost/expense structure
and intent to become profitable quickly in 1999.
8. Analysts then asked questions none of which were particularly
worthy of furthering the discussion. The only one of merit had to
do with overall markets which ODSI quantified as growing significantly
over the next couple of years, in particular the security software
which customers want now and will install in 99 and the high
performance switch business. (I should caution here in the sense that
high performance net-working is also very competitive but ODSI did
have some nice products in gigabit Ethernet and so on.)
Overall, I would say this was a very positive CC. I think they have
the right formula for 1999. They will have a road bump here when the
4Q 98 and full year numbers come out since the restructuring will have
a draconian hit on this performance. The CC for the quarterly numbers
review will have to reemphasize everything they said today to keep
it all in perspective. I see some effort to break through 5 and
change as it moves up but last week at 2 and change it was a steal.
I think it will trade in this range until the 98 numbers come out and
then my hope is that it will make a significant effort to break out.
Anything that can be added by the thread to enhance our knowledge is
appreciated. Thanks in advance. |
