I missed the IBD today but will see it when I get home on Thursday.
Okay, now, the Q&A from CC:
Q: Guidance for gross margins?
A: Impact from Corning (preferred customer reductions) will off-set high-yield DWDM margins. We'll see improvements, but not as drastic.
Q: Competition in stabilized modules?
A: Not much yet. Others are trying to qualify. We have best power, reliability, and stabilization. Others are having trouble with stablility at higher powers.
Q: What percentage is coming from Corning contract?
A: Same in Q1 as Q4 in terms of %.
Q: Reactor numbers? [referring to production]
A:: We'll need capacity by 2000.
Q: Utilization in Q1?
A: Chip level was under capacity. Reactor level had no limitation for current demand. . . . fiber module capacity restricted now --- going to 7/24 in Victoria in Q2.
Q: What about source lasers?
A: Not actively in high production. . . looking for spot to differentiate.
Q: Possible acquisitions. . . what types of technology?
A: IOC is a good example of type we'd acquire. We needed lithium niobates for this rapidly growing market --- gave us synergies with our customers. We'd broaden our product space.
Q: Revenue guidance going forward?
A: We're comfortable with analysts' 10% sequential.
Q: LU said shortages in certain components. Any constraints?
A: We delivered considerable amount, at times they wanted more, constrained on packaging.
Q: Satellite programs?
A: Winding down.
Q: Communications continue to increase?
A: Yes, every quarter.
Q: R&D?
A: 9.4% of sales is within normal range. 9-10% is right level. Up 35% y/y. Up 75% for DWDM.
Q: Undersea programs?
A: 4-year agreement with Alcatel. Two other large potential customers --- using higher channel count, so need higher power.
Q: Gross margins --- impact of long-term contracts --- how many of top 6 are under similar contracts?
A: Four.
Q: Undersea boosts gross margins. Are yields as high as terrestrial?
A: Lasers take more testing, so yields are lower and costs higher for customer.
Q: Capacity in Victoria?
A: Three shifts in Q1, now going to 7 days a week, 24 hours a day.
Q: What stage is 1/2 watt chip?
A: In production by end of '99.
Q: Cable TV market?
A: It's much ssmaller. We don't break it out.
Q: JDS a large customer?
A: Yes. We have a good long-term contract.
Q: Metro market targets?
A: Regarding electro-absorption, no plans to introduct products. The demand is for pump lasers and amplifiers for metro market.
Q: Growth in Europe, does this include OEMs?
A: Yes, to OEMs. Don't know if it stays in Europe.
Q: Are you seeing DWDM take off in Europe?
A: Yes!
Q: Tunable lasers?
A: 1550 nm range, tunable over complete band. Used for scientific instruments. Working on products for communications space.
Q: Improvement out of long haul?
A: Yields are coupled with production specifications. Higher power equals lower yields. If constants were specific (which they're not), yields could rise, but that's not the market.
Q: What % for submarine and expectations?
A: Less than 5% in Q1. Growth depends on what % fiber cabling business can access, specifically Alcatel and if we get chosen by other two potential customers. Good chance, but we don't know. Won't be less, could be substantially more.
Q: CableTV as %?
A: CATV not as high as long haul and submarine. ATT/TCI deal indicates there will be a lot of deployment. We're well-positioned.
Q: Increased manufacturing? Is there enough packaging capacity?
A: Yes. In Q2. Q3 we'll turn on some facilities. Will squeeze more in existing facility and increase yields.
Q: Victoria building is done, you need to hire and be qualified by Q4?
A: As we work with 2 submarine partners, they'd need substantial chips. [Not a non-sequetor. Question: will you have factory qualified by Q4? Answer: we'll have to due to customer needs.]
The mystery of the two submarine customers stands out like a giant in a crowd of pygmies. Or, perhaps it's my curiosity that's the giant.
With such a dynamite quarter, it'll be fun to watch how the Street reacts.
Pat
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