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Technology Stocks : Stratex Networks, Inc. (STXN) -- Ignore unavailable to you. Want to Upgrade?

To: investsformoney who wrote (766)	10/18/1999 6:51:00 PM
From: Rob Preuss	Read Replies (1) \| Respond to of 1762

A few quick comments about the conference call: + They missed expectations slightly. EPS was expected to be $0.03 but came in at $0.02. This was due to last minute unforseen shipment issues; specifically, they were unable to ship $2-3M within the quarter due to supplier problems... but these problems have already been corrected. If those orders had shipped within Q2 the revenues would have been about $71M. + 2 new big OEM agreements! => A $110M OEM agreement will be announced before the market opens tomorrow. This is a 3 year agreement that solidifies the relationship with this OEM and expands the volume of product they will ship through this OEM by about 70-80%. => A similarly sized OEM agreement is still being negotiated and is expected to be completed soon. Annoucement to come after its completed. This will expand the volume of product they ship through this OEM by about 400%. + New products to be announced over the next few quarters. => Will offer ultra-high capacity point-to-multipoint. => Use of new "velocity" chipset will lower the cost. + Altium product demand is up... 50% higher than previous expectations. Expect big ramp up in Altium sales to occur during Q4. DMC enjoys a nice competitive advantage in these products: => Range of frequencies (6, 7, 8, 11, 13, 15, 18, 23, 26, 28, and 31 GHz) is the broadest offering of anyone among similar (155 Mbps) products. => Altium achieves its 155 Mbps by using 128 QAM and only uses 28 MHz of bandwidth... competitors similar products use twice that much bandwidth to achieve the same data rate. + The company is essentially debt-free with only $3.4M in debt. They have a $100M shelf registration in place with the SEC, valid for 2 years, through which they will sell shares to raise any capital the company needs. + They closed Q2 with $31M in cash (vs $23.4M in Q1). Accounts receivable, DSO's and Inventory is down while inventory turns are up. + New orders in Q2 were $71.2M (vs $67.8M in Q1). One new order for $4M was dated 1 October instead of 30 September and so in not included in this number; otherwise the new orders would have been about $75M. + Gross margins were unexpectedly good for Q2 and should continue to improve in Q3 and beyond. GM on Altium and other new products is around 35%-45%. Overall they're looking at sequential growth of around 7.0% to 7.5% per quarter (31% to 33% per year) although they may see some lumpiness in sales for any particular quarter. With this strong growth in sales, improving margins, a competitive advantage in their high capacity Altium product line, and new ultra-high-capacity point-to-multipoint products (based on the new and lower-cost "velocity" chipsets) to be announced in the next few quarters we should see a strong run-up in the stock price over the next 6 months. If the small earnings disappointment causes a drop in the stock price in the morning... it won't last for long as I (and many others, I am sure) will see this as nothing less than a super buying opportunity. Rob