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

To: lazarre who wrote (992)	7/20/2000 9:42:46 AM
From: Rob Preuss	Respond to of 1762

Lazarre, You've got it exactly right. We missed revenue (top line) estimates by about $10M but beat earnings (bottom line) estimates by $0.02/sh. How can that be you ask? Like this... + The whole industry is having trouble getting parts. + For DMIC, this has affected their low-margin high-volume products like XP4 and DART. + At the same time, DMIC is not having trouble shipping high-margin product like Altium. The result: + Inventory of unfinished low-margin products has increased while they try to get for parts, + Backlog of low-margin products is high while they try to finish and ship them to customers, + Overall gross margins have skyrocketed to 35% since they're shipping a greater percentage of high-margin Altium products, + Revenues came in a $86M instead of the expected $95M, but due to the higher margins, earnings came in at $0.12/sh instead of the expected $0.10/sh. In the meantime, demand for DMIC's products is at an all-time high as evidenced by record new-product orders totalling $126M for the quarter. The parts shortages are likely to continue for the next two quarters. This is (and should be) a major focus of DMIC management... if they can get the parts, then they can ship the products and get even better revenue & earnings. We have a good management team, they can't work miracles but they'll do as well as anyone can to resolve these parts shortage problems. They've added new suppliers and they're getting more parts from existing suppliers so I expect them to ship more product this next quarter. I also expect overall gross margins to fall to about 34% because they'll be shipping more low-margin products (shipments of high-margin products increase as well). In the meantime, new ultra-high-capacity products being developed under their "millenium" program are on-track. In short... if you can hold your shares for 6 months or longer... BUY MORE NOW! Rob

To: lazarre who wrote (992)	7/21/2000 4:24:52 PM
From: Rob Preuss	Respond to of 1762

Found on Yahoo (purportedly from Briefing.Com) Earnings season is always a volatile time with many stocks surging on bullish news or getting blown up following some type of disappointment. What this time period also presents are numerous trading opportunities. DMIC comes into play in this regard in the wake of their recent 1Q01 profit report and the subsequent pummeling that saw the stock tumble nearly 30% at its intraday nadir. The question is whether this presents an opportunity to step in at cheaper levels or to follow through on the negative momentum. Trading Points The first step is to look at the report itself. DMIC reported earnings of $0.12 a share compared to $0.00 a year ago and actually beat the First Call consensus of $0.10. On the revenue front the company reported sales of $86.7 mln vs year ago of $66 mln for an increase of 31%. The problem arose from the fact that the company failed to meet revenue projections of $95 mln. There was speculation that sales of the broadband product were weaker than expected and customers in Europe delayed orders. The company stance was that industry-wide component shortages presented short term challenges to certain product lines. This could explain the swift and severe punishment and the subsequent recovery off of the opening low. Confined action at still firmly lower levels followed into the close. There was some further bullish news released with the earnings numbers. Margins posted a significant increase to 35.2% from 27.5% last quarter. The shift to the wireless broadband product lines and company efforts to reduce manufacturing product costs were cited as the reasons for the improvement. Also, new orders for Q1 were at an all time high, rising to $126 mln vs the year ago quarter of $67.8 mln for an increase of 86%. Rising demand for its Altium high- capacity wireless product was given as the reason for the dramatic increase. The company expects to continue to "ramp capacity to meet customer demand with increasing profitability." Finally, the companies DSO number (days of sales outstanding) rose to 122. This is calculated by dividing receivables by revenue and multiplying by the days in the period. Rising receivables could present problems as customers refuse to pay or return products but the company stated once again that high demand was the reason. This time, sales to South America and Asia, with longer than typical repayment periods was said to have triggered the higher number. We have a bit of a mixed bag with the company attempting to smooth over the decline in revenue and the higher DSO by stating that they are a function of very strong demand. However, the track record of DMIC supports the high demand view with earnings for FY01 expected at $0.53 (+211.18) with FY02 at $0.74 (+39.4%). Fortunately for this issue we have an aid in helping to determine which side of this potential trading opportunity to take, its 200 day moving average. Including Wednesday, the stock has flirted with this average on five occasions over the last 16 months. May 2000 marked the only time the stock spent any time below the average but only one close below was was seen before prices quickly pushed back above again. At this time the average is at 29. As long as prices continue to stabilize above this area DMIC should remain positioned for additional appreciation with potential back to the July high at 43 over the short term. Failure to hold above argues for at least a retest of the May/June lows near 22.