Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Efficient Networks Inc - (Nasdaq- EFNT) -- Ignore unavailable to you. Want to Upgrade?

To: Mark[ox5] who wrote (567)	10/19/2000 12:48:06 AM
From: Mark[ox5]	Read Replies (1) \| Respond to of 675

Stuff I put on Yahoo board; will repost here for non Yahoo lurkers messages.yahoo.com I have yet to listen to the CC, but these are my impressions from the financials. Revenue has already been covered, and gross margins everyone has to realize this IS the number we should all care about. What flows out of gross margins goes straight to the bottom line. Now lets look at the cost side which has been totally discounted and ignored by the board, but the numbers there are equally impressive. There were some MODERATE concerns there, last Q.. so lets compare last Q to this Q This 3 areas of concentration are Research and Development, Sales & Marketing, and "Overhead"-- I will focus on the first 2 as the latter is basically offfices, lighting, copy machines, which will increase as your work force increase Now last Q, Revenue increases about $40 Million or 64% sequential ($62 to $102) On the cost side lets look at R&D and Sales & Marketing. You want R&D spending to be your main cost expense that goes up... R&D keeps you competitive, next generation products, improvements, etc R&D last Q only went up a measly $200,000 from $8.7M to $8.9M This is bad. That is only 3% sequential growth in R&D investment ... yes its a "cost", but to me it is like a person getting an education.. you have to pay upfront but you are investing in yourself. So that was negative Now Sales/Marketing last Q went from $9.8M to $18.1M. Now in this category as you grow the number should rise but you want the cost under control... this was a huge increase in cost last Q... it was a 85% Sequential increase. That is bad.. bad. Granted, the revenue flew 64% so I can rationalize it, but still its a lot of extra expense and all that hits the EPS number that the lemmings only care about. Now lets compare these above numbers to this Q Revenue only grew 25% in a tough market. Agreed there.. not huge growth but we can live with that, especially with gross margin expansion. How did R&D go? Did they improve on the 3%? They sure did: From $8.9 to $13.0! That is 46% SEQUENTIAL increase in the ONE cost component I certainly dont mind going up. Put another way of the $127 M they brought in they REINVESTED $13 M of that back into the company or 10%.. this is still on the LOW side compared to many companies I follow (many are 15 to 20%) but the improvement and committment is there. The trend is better. As for Sales and Marketing which was a huge increase in expenditure last Q? Well it only went from $18.1M to $18.2M... essentially 0% increase... So that means they "squeezed" another $25M out of sales without adding any extra costs to their bottom line. That is how this .10 EPS # came about. For example I forecasted this number to be $23M or so... especially based on history. But they contained that cost and were still able to grow in a tough tough market, and you see all the new contracts announced weekly. So to review Last Q Revenue +64% R&D Cost/Investment +3% Sales Cost +85% This Q Revenue +25% R&D Cost/Investment +46% Sales Cost Nil So as the company is beginning to somewhat mature the management is allocating to the right areas... this is a big positive which is probably overlooked. Hopefully this did not put too many of you to sleep who actually read it, but its important. Mark