TD.
in the unlikely event you missed KK on squawk, following is the transcript. if you prefer eating bandwidth, hit the link for the aud & vid.
my apologies if it appears that i'm stalking -- perhaps giving you the willies -- but i can't help but dig your (long-term investment) style.
cheers,
-chris.
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CNBC - SQUAWK BOX
CEO CALL: UNIPHASE (UNPH) CHAIRMAN AND CEO KEVIN KALKHOVEN ON THE COMPANY'S Q3 EARNINGS
APRIL 27, 1999
mktnews.nasdaq.com\\www\nasdaq\news\msnbc\1999\4\27\NASDAQ_0910_20745.htm&usymbol=UNPH&logo=True&companyname=Uniphase+Corporation
SUMMARY: Kalkhoven says the major part of the company's product line goes into telecom. Kalkhoven comments on the company's bookkeeping.
Mark: This morning the company posted a third-quarter profit of 36 cents a share, 4 cents ahead of analysts' estimates, and 11 cents higher than a year ago. Shares of telecom equipment, including lasers and chips used to increase the carrying capacity of optical fibers, increased 105% from a year ago. And Uniphase expects these numbers to get even bigger, after the company closes its merger with Canadian rival JDS Fitel in June. Checking the chart, shares of Uniphase closed yesterday at 121; the 52-week range is 31 to 136. Joining us now with more about his business is Kevin Kalkhoven, Chairman and CEO at Uniphase. Good morning, sir, good to see you again.
Good morning, Mark.
Mark: The merger plans are on track, I assume, I think you hope to close it or have it take effect in June or July?
We believe it'll be the end of June, a bit like waiting in line at the moment, but we'll get there.
Mark: What's holding things up, out of curiosity.
We first announced it on this program a little while ago, we said it will be at the end of this quarter, and we're on the schedule. I'm just impatient, that's all.
Mark: your number numbers are out. Record $470 million, net sales up 55%. Pardon me, I'm just seeing this now for the first time. It looks like business is usual, meaning pretty darn good. No slowdown in the demand for your products? A lot of people in the high-tech world are saying, you know, Y2K might cause a problem, but you haven't and see any evidence of that?
No, as long as demand for bandwidth keeps increasing, which is it at a rapid rate, of course, which is the Internet and all the data communications. We think we're kind of independent of any software bugs that might happen.
Mark: And most of your--well, I was thinking in terms of, you know, perhaps some capital expenditures gets postponed or accelerated because of Y2K, but obviously your numbers show you're not seeing that effect. Most of your product goes into telecom, right?
Correct. The major part of our product line is oriented around getting more bandwidth on both the existing and new fiber-optic networks.
I also saw in your earnings report that your cable business was very strong. Can you talk about what's driving that business and maybe what, if any, impact AT&T-TCI merger or MediaOne mergers might have on that.
Yeah. This is a fascinating area where technology, namely wavelength division, multiplexing has changed the way which you can use these cable networks. Before they were really broadcast systems just going out, and it was very difficult to get data and voice over these networks. With the advent of the communication systems that we have today, it means you can not only get the analog TV signal, but get voice and data going both ways. And the net result is it's a very cost-effective way potentially of getting to the end consumer and the home. And there's a lot of activity. And I believe that with the AT&T-TCI merger, we'll see even more next calendar year.
Mark: Your bookkeeping, at least in my experience, and looking over your profit loss and your consolidated balance sheets, has tended to be on a conservative side. Does it make you uncomfortable at all that you're now entering this merger with JDS Fitel? According to G.A.A.P., if you were to use that, this is a massively dilutive deal and you will actually be losing money.
Yeah. The SEC's determined to--the net result is people are going to have to do supplementary reporting to show the true operating performance of a company. You're right, we tend to be real conservative in the way in which we do report things, but with the pooling dying, I think everyone's going to have go to look at EBITDA numbers and cash flow numbers and supplementary reporting I think this is just going to be a fact of life for many companies in the future.
Mark: Okay. So, make the case that this deal makes financial sense on an EBITDA -- boy I hate getting into that, because it's so hard to understand, but can you explain that in layman's terms, why should we not be worried that under general accounting principles it will show ups as a loss?
Well, simply, if we're to pool the two companies they would simply be no goodwill associated with it. Because this is not going be a pooling transaction, there's, obviously, the difference between the asset value and the stock value associated with JDS, a couple billion dollars.
This has nothing to do with the true operating performance of the company. The operating performance of the company is actually very profitable with very strong cash flows and very strong growth. So, the impact of the goodwill has actually no real effect on the operation of the company, whatsoever.
Mark: But under the bookkeeping rules, what you will have to do, obviously, well, not obviously, a lot of people don't realize this, that goodwill, that premium you paid now must be charged against earnings going forward until it's written off, correct?
That's correct.
Mark: That's what makes it look on paper like maybe things aren't too good, but it's --.
But that's absolutely right. The FCC is working like tax simplification. We're going make your life easier. And the net result is going to be a lot of supplementary reporting for the investor, but it's just going to be a fact of life.
Mark: You have an advantage, do you think, in that you are not--you're kind of an apolitical company?
Yeah. We're kind of a proxy for the Internet.
We are independent of any telecoms equipment company. We're independent of the data or the services that come down the network. It's just that the light that is used to generate them is generated by our lasers, just as, you know, a microprocessor's kind of independent of the software that runs on it, we're kind of independent of what else is going on in the network. We are just the light that runs through it.
Mark: Well, sir, we look forward to watching you implement the merger and maybe we'll talk to you in the fall and see how it's going.
Well, look forward to it. Thank you very much.
Mark: Appreciate it. Kevin Kalkhoven, Chairman and CEO from Uniphase, joined us from Stanford in California. |
