I'm as disappointed as anyone by the Street's reaction to CMTO's conference call. Revenues grew by 25% Q/Q and 139% Y/Y, head-ends sales doubled over Q1, they added two volume orders (Charter and ComCast) and closed two acquisitions.
Notes from call (all errors mine):
Com 21 quarterly conference call, July 20, 2000
Continue to meet internal objectives. 25% seq increase in revenue. Important contract wins. Key acquisitions.
Market demand is strong. Growth in all product lines. Esp strength in DOCSIS. 184,0000 modems shipped 86% increase in DOCSIS sales.
Head-end, by far our best ever quarter. Over 244 sold. 2X Q1's level, which was a record. Installed base represents captive market for modems.
1,200 ATM head-ends. 16 million homes passed. Will serve 2m homes, 1.4 m razor blades left
$51.4 m revs, 139% y/y increase. Healthy backlog. Important NA wins. Comcast Online Communications for 50,000 DOCSIS modems through the year. Charter Comm, 4th lgst MSO in NA for DoxPort 111 modems. Will also allow us to test products. This is imp for Docsis 1.1.
Product strategy:
Long targeted the integrated voice and data markets. Will offer full range of products. Will continue to expand home networking products. For both home and office. Will be standards based in NA and DVB in Europe. On ATM side, voice over exchange is currently in beta. Will be offered in Q4. Wireless version shown at recent show. In May we submitted Dox controller to CableLabs. CMTS with 1.1 standards in mind. Toll-quality voice supports 4,000 modems. Will be in beta by end of year. Don't know when Cablelabs testing will commence. CableLabs DOCSIS modem with USB port was certified today. DoxGate interface unit --- extremely pleased --- will be outside the home. Voice, data, and video. Multiple premise devices into one unit. One of bottlenecks in industry is installation. A lot of interest on this device.
Acquisitions --- completed GadLine Ltd. --- the more we know them, the better we feel. Significant expertise in voice over IP. Focus on soft-switch gateways. BitCom completed. Experienced engineers. Wireless satellite and broadband expertise. They'll focus on ATM. We'll continue to seek out partnerships.
Dave Robertson ---
$51.4 million revs. 25% seq increase. modems 184,000 units, 19% increase. 50/50. 86% increse in DOCSIS. 77% of sales were modems. 244 units of headends. Geo: domestic 31% vs. 69% intl. Siemens and Philips, top customers.
32% gross margins. In line with expectations. Have shipped more DOCSIS. Margins will trend lower in 3Q, with improvement in 4Q. OpX 19.1 m, 37% vs. 39% . Will increase R&D. Net loss 3.7M, or .17 per. vs. .10 a year ago. Acquisitions will show up in Q3.
91M cash, vs 99m a year ago. 24 days inven turns. DSOs 57
Greater ops over next quarters. Market base continuing to grow.
Q&A:
Q: (ML) --- Update on cost reduction programs? GadLine voice and softswitch technology, could you elaborate?
A: Two products near term, one is docsis, it is on track. Will introduce in Q3. Impact in Q4. Acquisition of Bitcom, we're improving margins in ATM products, impact in Q4. GAdline and voice activities, we're definitely focusing them in that direction. We will share a DOCSIS platform for modems. They're working on Vivid. A voice gateway for voIP. They have one for circuit-switched voice. Working on IP now. Softswitch is larger and more complex. Is in design right now. A little early to give date. VoIP gateway product should start to be in serious trials in Q1 and in production by Q3.
DOCSIS will still be in Q3, but has been pushed out 3 or 4 weeks.
Q: (CSFB) On headend, what was strength there? GMs were down on headend side. Why? Review component constraint issues.
A: Driving growth is fact we're offering toll-quality voice over ATM cable system, delivered to public switched telephone network. This has renewed interest in ATM product line. Some unique vertical applications have come up. TDSoft is a necessary part of that. They do gateway piece of that product. It is joint effort. Components, bulk of issue is not internal. We've been able to build and meet commitments. Same with ATM modems. Problems with OEM supplier. There tend to be a number of different issues. We hope to get more modems next quarter. Head-end margins, we include other products and services. Head-end margins were actually up over Q1.
Q: Cost-reduced DOCSIS modem, will it need to be re-certified?
A: Yes, it is new modem, based on latest tech from chip supplier. We're on the leading edge of that.
Q: Push out for cost-reduced modem, why?
A: Number of issues. BRCM one issue. They were later. We thought we'd make up difference. We're pleased with how close to schedule we are.
Q: GMs going forward? Voice, gateways, etc? Intl business is strong. Will you be dominate force in modems? Headcount? Complexion of contributions from data-based modems and voice applications?
A: Headcount. 306. Next Q will add acquisitons. Will be in mid 30s GMs. In 2001 with new products we'll be there. Headcount will go up to 460 to 465. Voice is tricky question. We're counting on VoIP and our 1.1 CMTS. Testing for 1.1 is not firmed up yet. It's an order of magnitude more complex than 1.0, QoS, etc. Some time in 2H 2001 will see VoIP products ramp up.
Q: Was component shortage related to Microtune?
A: Microtune, that won't have any real affect on shortage. Will be used in modem coming out this quarter. Shortage has been OEM tuners, from Toshiba. Problem is being resolved. No real problems after that.
Q: Value-added products? Customer reception?
A: Voice card for box system, etc. Office cable modem is out there, had significant interest from one of top 5 cable cos, in fact 2 of top cable companies and over-builder. No significant orders yet. But we're close. Everyone wants to buy the modems and everyone trying to figure out how to market it. Over next few quarters it should contribute in a big way.
Q: Dox-Gate, customers? How many engineers? Is GadLine completely resp for VoIP gateway or are they using someone else?
A: Some customers are obvious, like AT&T, but there are 4 or 5 other customers who have expressed interest in it. A couple of issues that people wrestle with. Powering issues to be resolved. Gadline, they are working on VoIP gateway, they have partnered in past with others. For example with TDSoft for a piece of it. They will build total product themselves, over time. 128 engineers.
Q: Is 121 a broadcom chipset. It is libit (?) chipset.
A: No real problem there. The USB piece doesn't impact rest of design. Key components are driven by competitive pressures from other uses --- like handsets.
Q: Doxgate trial timing?
A: Plan is to enter trials by end of year, Q4, first shipments in Q1,01. A number of different versions.
Q: Will it include settop box?
A: Initial launch will not include video. Future products will.
Q: BtoB? ATM head-end in Japan?
A: Positive btob. Really good solid bookings. Customer for product is keeping secret what they're doing with it. One application is power monitoring and control for industrial applications.
Q: 121, not shipping till Sept, why? OEM partner catching up with demand?
A: Absolutely.
Q: Flash and capacitor shortages?
A: We're not having problems internally or with our manufacturers. Our OEM vendor is making substitutions to handle problem. Very significant upside for what they've been doing.
Q: Seq. growth rate accelleration?
A: We're growing at a rate that more than doubles every year. We expect to continue that. Risky to say we'd do more than that, but it's a supply issue, not demand.
Q: Are you losing share?
A: No, we're not losing customers. What's being gained --- competitor is selling to customers who are rolling out faster than anyone else. We don't feel like we're missing out.
Q: Share in Europe?
A: As far as I can tell, we are holding our position as number one. |
