Ben,
Good questions!
I don't recall anyone worrying that they may not be
able to ramp up quickly enough... I trust Chuck & Co
to make some pretty good guesses on their manpower
requirements so I'm not overly worried. But its
always possible that demand will recover more quickly
than they can ramp-up to meet it... the concerns here
are not only for the sales force but, now that they're
outsourcing alot of their manufacturing, whether their
contract manufacturers can ramp-up quickly enough too.
That said, its my impression that Asia-Pacific has stabilized
and is showing signs of spotty recovery... not a widespread
recovery. Unless Japan's government and financial institutions
really get their act together (which I think is unlikely),
I expect any recovery to remain spotty. The fundamental
demand for the equipment is there... but the customers
just can't find financing; this hurts DMIC as they're
too small to provide such financing themselves... instead
DMIC is working hard to develop creative arrangements
with third parties who can provide such financing.
The merger and restructuring efforts have gone very quickly
and very well... better than I'd expected. They now have
a broad product line with new (higher-margin) products and
a unified sales force that can do alot of cross-selling to
their customers. Customers like one-stop shopping from
reliable vendors like DMIC... and DMIC is properly cautious
about being reliable... delivering what they promise (and
not promising too much... so they don't disappoint customers).
The comments on Altium/backhaul operating in the same band as
access equipment were in response to a question about Altium
competition from fibre/landlines. Basically, the question
assumed that a customer would have to use up some of their
available spectrum to use radio backhaul instead of landlines,
thus making this spectrum unavailable for use in access... if
that were true, it would detract from the appeal of radio
backhaul and add to the attractiveness of landlines. But,
as Chuck & Co pointed out, that's not the case. Altium backhaul
and P-MP access radios can happily coexist in the same frequency
band. Landlines are distinctively unattractive because of
the time and effort it takes to install them (including getting
those pesky rights-of-way before you even think about digging a
ditch)... with radio, you just need a spectrum license, a
rooftop agreement and you're operating within days! That's
the whole approach of WCII.
I suppose NEC and others will eventually enter this broadband
radio market to compete with DMIC's Altium... that's only natural.
In fact, I think there are other broadband radios available
that compete somewhat with Altium... but I think Altium is the
current leader (by a couple of years) in that they have a
product they know they can manufacture in high-volume (and
with modest cost) now... without running into (potentially
very expensive) reliability glitches. Moreover, DMIC is actively
looking ahead to the product improvements and new products they
will need to maintain that lead. That's why they're spending
$5.4M/quarter on R&D.
My biggest concern for DMIC now is China. They're counting on
continued strong demand out of China... that's how they've
sized themselves for now. If China blows up (e.g., currency
devaluation) like Brazil (or Russia or Asia) this could hurt
DMIC... we were fortunate that DMIC had little exposure to
Brazil (or Russia)... if there is a currency devaluation in
China (without offsetting increases in demand elsewhere...
like Asia) the demand for DMIC products in China could dry up
quickly and we'd have to face some more restructuring.
Rob
By the way, I really like that DMIC is outsourcing alot of
their manufacturing... and doing it slowly/carefully to
ensure they still deliver high-quality/reliability products.
It sort of forms an american-style "keiretsu" among a group
of companies with common/pooled interests in mutual success.
In effect, this gives DMIC the advantages of a bigger company
without many of the disadvantages. |
