Doug I am watching CAMP took a position at 28 3/4, and I think this is going to move. I've already had CAMP quite a while in the past like PUMA but I've since exited both of them. Now you have to take analysts opinion with a grain of salt but they do provide facts about the company that are interesting. (Note the very last sentence in this post)
Roth Capital Partners
Glenn Powers, (206) 382-9926, gpowers@rothcp.com
3/1/2000
******
California Amplifier, Inc. (CAMP-NMS-$45 1/8)
Sprint Chooses CAMP For MMDS Unit; Raising Price Target
*******
Current Rating:
Strong Buy
Previous Rating: Debt(mil): $5.3
Shares Out.(mil): 13.6 Debt/Capital: 17.5%
Mkt. Cap.(mil): $613.7 Est. 3Yr. EPS Gr: NM
Avg. Daily Vol.: 351,960 Disclosures: b
Yr.FEB 1999 -----2000E------ -----2001E------ -----2002E------
EPS($) Actual Current Previous Current Previous Current Previous
1Q (0.04) 0.03A 0.14
2Q (0.07) 0.07A 0.15
3Q (0.02) 0.12A 0.16
4Q 0.01 0.13 0.20
YEAR (0.12) 0.35 0.65 1.30
P/E NM 130x 70x 35x
*Fiscal year ends February.
***************************************************************************
Summary (STRONG BUY):
of its MMDS outdoor customer premise equipment (OCPE) requirement during
calendar 2000. The initial order from Sprint is for about 10,000 units, which
should ship in late fiscal 2001 Q1 and in Q2. We have been waiting for either
Sprint or MCI WorldCom (WCOM-$44 5/8) to announce their vendor selections for
their national broadband wireless deployments, and this announcement indicates
that CAMP's participation in these deployments should be significant. We think
that CAMP's transceiver is clearly the most attractive, highest quality, and
most cost-effective OCPE product of its kind, and we expect that CAMP should be
the vendor of choice for these national deployments. We are maintaining our
STRONG BUY
multiple of 45x our fiscal 2002 EPS estimate.
Highlights:
calendar 2000 even before Sprint chose its systems integrator, an indication of
Sprint's commitment to CAMP.
* We do not know the percentage of Sprint's OCPE requirement that CAMP is
providing, only that it is the "majority" during calendar 2000. We think that
CAMP has an opportunity to increase its percentage with Sprint after this year.
* We think that winning this initial contract with Sprint gives CAMP a
competitive advantage as the MMDS nationwide deployments heat up.
* The 10,000 units in the initial order should ship in late fiscal 2001 Q1 and
in Q2. We think that there should be additional shipments of this size or
perhaps greater in fiscal 2001 Q3 and Q4.
* We had already built into our model assumptions about the Sprint and MCI
WorldCom deployments in fiscal 2001. We feel comfortable with our fiscal Q1 and
Q2 estimates currently, but believe there is upside to our fiscal Q3 and Q4
revenue and EPS estimates.
Analysis:
g
in a meaningful way in the Sprint and MCI WorldCom national MMDS deployments.
We feel confident that CAMP's transceiver has a distinct competitive advantage
in terms of quality and cost that should win it a majority of the transceiver
business in these deployments. CAMP has been making MMDS transceivers since
1995, focusing on the consumer space, with the manufacturing capacity to handle
large orders, and has emphasized quality and performance in its products. These
factors should make CAMP the clear choice for Sprint and MCI WorldCom as they
choose their OCPE supplier. Competing products are at a higher price point than
CAMP's and not as attractive, making them less appealing for the mass consumer
market.
CAMP will be either providing its transceivers directly to Sprint or to a
systems integrator that Sprint chooses. The price CAMP should receive for these
units is in the $200 to $235 range. We think that Sprint should be at a run rate
of about half a million MMDS subscribers per year by calendar 2001. If CAMP
merely maintains its 40% market share in the MMDS market, that would mean
200,000 units per year at $200-$235 each, for revenues of $40-$47 million per
year from Sprint alone. CAMP's transceivers typically carry a 40% gross margin.
We are not changing our model at this time, since the company is in its quiet
period with fiscal Q4 having just ended. In addition, we expect further
clarifying announcements from Sprint within the next month, including the
selection of a systems integrator, what cities it is deploying first, what
percent of the OCPE CAMP is providing, Sprint's unit requirements, and the
timing of the roll-out. We do, however, think there is upside to our fiscal 2001
Q3 and Q4 revenues and EPS estimates due to this announcement.
The company's fiscal 2000 Q4 just ended, and we expect CAMP to report its Q4 and
year-end numbers in April. We feel comfortable with our fiscal 2000 fourth
quarter revenue estimate of $26.8 million versus $26.3 million in the third
quarter and $10.1 million in the year-ago quarter. The company should achieve
our projections despite the supply constraints it announced. We also feel
comfortable with our fiscal fourth quarter EPS of $0.13 versus $0.12 in Q3 and
$0.01 in the year-ago quarter.
******
Investment Highlights
California Amplifier (CAMP) is, in our view, positioned to be the direct
beneficiary of new capital that has been committed for broadband access. Sprint
(FON) and MCI WorldCom, Inc. (WCOM) collectively committed more than $1.9
billion to consolidate MMDS spectrum (2.5 GHz spectrum that has traditionally
been used for so-called "wireless cable" - video broadcast) in March, April,
and May of last year. Their target application is to provide multi-megabit per
second network access over the air.
The April 1999 acquisition of Gardiner Communications Corp. has been
significantly accretive on a financial basis while bringing strategic customer
relationships with Hughes Electronics Corp. (GMH) and EchoStar Communications
(DISH) in the satellite-reception arena. Given the addition of service from
new satellites and increasing worldwide deployment of digital video, we
anticipate incremental replacement market demand from subscribers desiring to
upgrade satellite receivers in order to benefit from richer content selection
and Internet access.
We believe California Amplifier has fully recovered from a difficult period of
spotty revenue from wireless cable with a solid balance sheet, fewer
traditional competitors, and an industry that is transforming to broadband
access.
We view the broadband wireless industry as moving from one that is vertically
integrated to one that is horizontally specialized. As has been the case in the
computer industry with different suppliers providing monitors, storage
devices, printers, memory, and processors, we believe horizontal specialization
in the broadband wireless industry will lead to dramatic efficiencies and
opportunities for high-volume suppliers. In our view, CAMP's core competency
in the high-volume (daily unit production well in excess of 10,000) microwave
video market positions the company well to benefit from this industry
evolution.
Company background
805.987.9000) with significant operations in Dallas, Texas, California
Amplifier is the leading volume supplier of microwave transceiver equipment.
The company's products include C-band and Ku band receivers for direct to home
satellite service, MMDS (microwave multimedia distribution system - 2.5GHz)
receivers and transmitters and antenna products. During the April quarter of
calendar 1999, the company acquired privately held Gardiner Communications
Corp., a competitor and leading supplier of direct broadcast satellite (DBS)
reception equipment.
Ferris, Baker Watts, Incorporated makes a market in this security.
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