**** Hambrecht & Quist **** Hambrecht & Quist **** Hambrecht & Quist ****
Company: Westell Technologies
Price: 6.21
Recommendation: Buy
Notes: a,b,f
Date: 5/24/99
Strengthen and run a prudent DSL business. We believe that the
company has decided to take a multi-tiered approach to attack the DSL market.
First, the company will license and OEM its systems designs and technology to
strategic partners to compete in the large systems segment of the market. We
believe that Westell will also receive funding for product development from
some of these partners. Second, the company may focus on selected DSL product
opportunities. Finally, it appears that WSTL will selectively target specific
customers for its product offerings.
Compliment and interoperate with large network vendors' solutions.
Current partners with whom the Company's products are interoperable include
Lucent and Alcatel (ALA/24.65/NR). We believe that the Company will continue
to grow with these strong partners as Westell's overall addressable market
expands.
Maximize the synergy within Westell. We believe that the Company will
not only leverage the synergies between TAP and CPI but will also exploit
possible outsourcing opportunities of Web based provisioning and ordering.
Improve operational efficiency. We feel that Westell will focus on
improving its time to market in product development. We also believe that the
Company will also continue to focus on its quality program to continue to
exceed the standards of both its strategic partners and end-user customers.
Improve financial performance. We believe that Westell will focus on
delivering improved its earnings performance in a predictable fashion over the
coming quarters.
Industry Positioning. It appears that the Company will strive to focus
on being a strong, dependable and predictable provider of telco products and
services that interoperate seamlessly with their strategic partners and afford
customers a variety of total solutions.
Products and Services:
The combined Company will focus on developing telecommunications products and
services to help telcos and end-users enjoy the advantages of emerging voice
and digital services. Generally, WSTL's products will continue to serve the
needs of telcos service providers in upgrading their existing network
infrastructures to deliver advanced data and voice services to their
customers. We believe that the Company will continue to focus on its strong
position in helping telcos maximize the use of their installed plant and
equipment in the local loop.
While we expect that the Company will continue to develop and manufacture new
market leading products, we believe that this will now be done in conjunction
with strong strategic partners. We also believe that the company will receive
sales and marketing assistance on either OEM and/or royalty based models.
In services, we expect that Westell will continue its market leading position
in private-label services and soon offer its customers a number of new
services based on emerging technologies. We believe that CPI has been a widely
overlooked gem in the Westell portfolio businesses. We expect that this
division of Westell will continue to show strong growth well into fiscal year
2001.
Conference Plus, Inc. (CPI): Currently, this division of Westell, growing
in excess of 40% per year, comprises about 33% of Westell's corporate revenue.
CPI is a leading teleconferencing service bureau and provider of fully
managed, multipoint and multimedia electronic meeting services. CPI enables
customers to efficiently share information via the telecommunications based
media of audio, video and data conferencing.
CPI uses advanced switching technologies and software to simultaneously
conference together multiple telephones, videoconference terminals and/or
Internet connected personal computers. This division also offers its customers
a complete range of facsimile broadcast and fax on demand services. We believe
that a key competitive advantage of CPI is its Customer Reservation and
Billing System (CRBS). This proprietary system is a single platform customer
support tool that systematically enhances the customer service process from
reservations through billing.
Another advantage for CPI is its strong position in private-label services,
which provides privately branded commercial teleconferencing services to the
local and long distance network carriers, including, one of the nation's
largest RBOC's. We believe that this service offering will continue to be a
strong contributor to growth at CPI. With ISO 9002 certification, a focus on
customer service and micro-marketed services, we expect CPI will continue to
show strong growth, in excess of 40%, over the next several years.
We believe investors should recognize the following strengths that CPI brings
to Westell:
*Highly profitable and fast-growing service oriented with significant upside
opportunities over the coming quarters;
*Well established platform for future growth;
*Focus on quality and customer satisfaction;
*Proprietary conference reservation and billing system (CRBS).
Telco Access Products Group (TAP): This division of Westell continues to
provide telco service providers with solutions to help them widen the
"information bottle-neck" in the "last mile" or the local loop. This division
of Westell continues to grow at double-digit rates and contributes nearly 60%
of Corporate revenue. TAP's products help telcos link end-users to central
offices, providing improved transport, reliability and enhanced test and
maintenance capabilities.
TAP continues to deliver products that exemplify the reputation for quality
that the division originally established at WSTL. With over 300 products in
its portfolio, this global provider delivers a wide range transmission
products spanning loop technologies from 4 kHz analog to over 6 Mbps via fiber-
optics.
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