NT CC:
<NT warns on Q3.>
Roth commenting.
Frank Dunn new CEO.
Challenging period in industry.
High level of inventory of installed and with vendors.
Industry reaching sustainable levels of spending.
Still poor visibility.
Driving break even point down. Laid off 30,000. Now well beyond 30,000 level. Focus on cash management. Improved cash position. Shed non-core business.
Targeting break even to below $4 bill. Expect rev to come down a bit.
Focus on long haul optical. Start production on new high capacitiy optical switch. Out end of this year. Wrote off most of inventory in this sector.
Wireless: started some new networks in Europe, gaining expertise in UTMS, GMS etc....
Metro networks: optical networking for D-WDM and next gen SONET, soft switch capabilities added., still growing for NT, expect to grow well
Still working off excess inventory: carriers and NT.
Trying to get down to 45,000 people. Notify people at end of month about lay offs.
Hoping for more traction in Q4 for optical.
Q3 guidance: 3.5 bil in rev, reduction in all products and regions expect Asia (FLAT), 28 cent per share EPS. tax rate 30 percent vers previous 32, after tax charges 1.3 bil,
of 735 mil write off in good will, 650 written off in Q3.
Incremental charges:
-excess inventory $750 mil, mainly long haul, all inventory in long haul written off, includes supply chain write offs
-trade receivables, 8 percent up from Q1 4 percent, now 12 percent of receivables written off,
-54 percent of finance portfolio written off, up from 34 percent
-charge in third party investments (NT investments in other companies), reduce balance by 62 percent
Re-structuring charge 815 mil (work force reduction $300 mil (cash( , facilities 13.3 mil sq ft, 50 percent of capacity removed $510 mil, $300 mil non cash related.)
Facility write down 240 mil
cash increase by 1 bil, reduce 1.1 bil in bonds outstanding, no draw on credit facilities
increasing selling on non-core asset, expect 700 mil from sales, expect most of cash in Q4/Q1
-projecting break even point at 4 bil, expect to be at that level at Q1 2002
-Q4 charge for downsizing
-Don't see market re-bound to level of two years ago
Questions:
Q: When will guidance on Q4 be available? When Rev rate of 4 bil be achieved?
A: Visibility still quite poor. Oct 18, earnings release. Break even point will be well under 4 bil.
Q: Why is NT confident they can get 4 bil a Q?
A: Q3 usually weak. Q4 new products gaining traction.
Q: What segments were dropped?
A: Integrated divisions in metro space to save money. Metro networks, fire wall, circuit to packet, PBX, call centers all under metro networks now.
Q: 1 bil increase in cash? 1.1 bil reduction in bonds?
A: Cash up by 1 bil. Paper reduced by 1 bil. Focused on cash.
Q: Inventories?
A: Gross 3.6. Hoping for 3.2.
Q: Well below 4 bil, how much?
A: No comment, want to be well below.
Q; Optical long haul. In 2002, NT will see growth?
A: Optical market at all time long. Carriers doing a good job of managing bandwidth and gray market. Don't expect spending to be in tradition areas. Looking of Optera connect switch: 90 percent reduction in floor space, 40 percent in capacity, 73 percent saving operating cost, 80 percent saving in power, confident spending will be on this product when spending resumes.
Q: Product areas of weakness? 1 bil Q-Q decrease in optical sales?
A: No one area stands out. Down turn spreading to Europe in this Q.
Q: Bottom in carrier spending due to revenue and profit margin stablizing. Is NT looking at this or lookng to carriers for guidance.
A: Network customers: seen carriers who are going to make it, undecided pretty small number, drop in carrier wholesale business is stablized from earlier this year.
Q: Cap Ex going forward?
A: Reducing cap ex. Completing facilities to reduce cost. 500 mil total , 40 mil in second half.
Q: Component parts of sales?
A: Sold Clarify to Amdocs. Announced some of them. Not all.
Q: Traction of new products?
A: Soft switch, optera metro,circuit to packet, 3G wireless good all summer
Q: Optera connect traction?
A: Production start up mode for trial equip.
Q: Any optera connection wins?
A: Non -announced.
Q: Break even before EBDTA?
A: Earnings.
Q: Wireless was 1/3 of rev last Q. Growth 20 percent last Q? This Q?
A: Wireless down too. It did well but was down.
Q: What will give customers confidence NT will have products for next year?
A: NT has a plan. Products well defined. HDX, circuit to packets coming out. 3G and CDMA. Wireless strong. HDX in long haul should come.
Q: Impact of Sept 11?
A: No impact we have seen.
Q: Gains offseting charges in Q?
A: Detailed number were before tax. Tax rate 30 percent.
Q: Vendor financing commitments?
A: No major approvals in Q3. Commitments have come down. Should be down $100 mil.
Q: 10,000 people laid off, will a large business segment disappear?
A: No major units. Less units.
Q: GM for break even number?
A: Balanced gross margins. No change in GM in 2002.
GM Pressure due to too much capacity. Now adjusted.Higher than 20's but not in 40's.
Q: Head count today?
A: 60,000 right now. Ahead of 64,000 plan last Q.
Q: Cash up 1 bil Q-Q, net income was - 900 mil, inventories down 500 mil. How 1 bil increase in cash?
A: No idea on velocity on DSO's. Sold real estate. No 200 mil from Clarify deal.
Q: Last filing had a clause for tangible book value? Any changes?
A: Have not drawn on credit facility.
Q: How does board reach choice of CEO?
A: Looked out side, but chose NT internal candidate.
Q: Mid-Q had net liquidity of 6 bil, sense of where it will be this q?
A: Cash about 2.8/2.9 bil. Bank facility 2 bil. Flag ship facility 2.5 bil. CP program down to 300 mil.
Q: Booking?
A: No idea.
Q: Given increase lay offs. Comment of R&D?
A: Focus on products critical to sucess. Reducing some R&D lab since under utilized.
Q: Cash flow, D&A this Q?
A: Don't know yet.
Q: Vendor financing, can it stay that low in light of new 3G wins?
A: Working off finance portfolio. Last Q 2 bill. This is down. 3G customers not looking for financing as much as capabilities.
Q: China business suggest increase DSO's.
A: Looking for 80 days or better.
Q: Competition is stiff. Pricing trends the last few weeks.
A: All through summer very consistent. No worst. Price/Demand issue.
Q: HDX getting into labs and shipping in first half. Metrics to measure metro traction?
A: Area they are spending are in metro networks. Still struggle with optical inventories. Near term expect carriers to look at soft switches and circuit to packets, VoIP on PBX, number on position in VoIP
Q: Any traction on security or fire walls.
A: Seeing interest. |
