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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (35124)	11/13/2001 9:51:47 PM
From: Johnny Canuck	Read Replies (2) \| Respond to of 67946

SCMR CC Q1 Nov 13,2001: Q1 in line with guidance in Oct Rev 21.2 mil, loss 16 cent per share charge of 202.5 mil in re-structuring lowering cost by 21 percent SCMR focus on technology innovation and customer relationships during slow down Deploying equipment in ILEC's, focusing on SM3000 and SM16000 integration, Only scalable edge to core solution Customers deploying both SM3000 and SM16000 across network Integrated product line allow carriers to make best use of capacitiy in network Developing features to allow carriers to convert to mesh architecture. Looking for all switched infrastructure. During Q , introduced SILVA(?) insite software. Make progress with transport products via SM10000. Selected and deployed because of density, long haul and ultralong haul solutions, cost effectiveness, See increasing trials. BLS deploying 256 X 256 switch in network. Shipped large grooming systems for trials in Q. Financials: Rev 21.2 mil in line 2 > 10 percent customers 9 customers total in Q Customer mix switch to more ILEC customers this Q. Product mix: Both transport and switching products shipped in Q. Intl sales most of sales. Expect mostly Intl sales going forward till we convert more trials to shipment. GM 5 percent, well below historical levels due to low rev and high fixed cost Cost saving in Oct re-structuring re R+D 37 mil S+M 14 mil G+A 3 mil Other Income 13 mil down Q-Q Loss 16 cent Share count 249 mil Re-structuring 202 mil. 1/3 or 66 mil have cash impact over next few Q 102 mil due to rev write off 7 mil in lay off charges 93 mil due to facility closings and asset impairment, vendor financing Save expenses by 12 to 13 mil per Q, 12 mil Cash 1.1 bil down 100 mil Q-Q, 292 mil in Cash of Eq. 437 mil in short term invest (less than 1 year) 420 mil in long term investments AR down 13 mil to 28 mil DSO up 45 days to 119 days, model 60 to 90 days, due to increase Intl Sales Inventories down 50 per to 33 mil. 42 per raw, 13 per work in progrsss, 45 per finished goods. Head count 701. Guidance: Market conditions still difficult, longer evaluation cycles, limited visibility, only Q2 guidance Q2 Rev 20 to 25 mil GM 10 to 15 percent, up over Q1 due to re-structuring lower cost of sales Op Ex down 10 to 13 mil from last Q Other Income 11 to 12 mil down from last Q due to lower interest rates No tax provision, due to losses Q2 sharec ouunt up 4 to 5 mil, last Q 249 mil total Cash burn 65 to 85 mil, due to re-structuring and operating cost, 1/2 of last Q's burn rate Goals: -Focus on rev growth by Tier 1 customers -Decelerate cash burn -Pro Forma break even as soon as possible. -Exit year within 5 percent of 1 bil. Q: Trial activities? Numbers? Change from last Q A: No comment on exact numbers. SN10000, SN16000 and SN3000 in trials. Expect more trials next Q. Q: SN4000 how does it fit into consolidation of switching division A: SN4000 features also in SN16000. Know in that family Q: Trials, SN16000 in trials with some large ILEC's, specific of products? A: 256 X 256 switch fabric Q: 100 mil burned in cash in Q1, how much is re-structuring A: 27 mil due to April re-structuring Q: Per of rev from 10 percent customers? A: Majority of rev split between two 10 percent customers, both ILEC's. Q: Color about collection patterns? A: Spike of DSO's not related to poor collection activity. Reflects shift to more flexible trade credit. Extending credit to specific customers. Expect to get back to historical range once market stablizes. Q: Core Express buy by WMB? A: Wrote off assets for core express. Working with customer to see what we will collect on receivables. Q: Trial for SN10000 for ILEC???? A: Expanding trials with large ILECs. All have installed solutions, but look for solution that give cap ex and operating saving. SN10000 add more capacity and reduces Op Ex. Q: Strategy for IXC penetration, Opportunity to upset incumbent suppliers? RFP activity? A: Everyone focusing on large ILEC's. Will increasing trials in Q. Q: Equipment returns? A: Not case in equipment under leases. In both cases customer will retain equipment but will need to re-negotiate terms of payment. Q: Pattern of deferrred rev down Q-Q? A: Slightly. Split 1/2 product deferral and service deferral. Going forward will trend slightly below the level this Q. Q: Q2 flat rev. Are we at a sustainable level? A: No comment. Guide to flat Q due to backlog orders and existing customers. Q: Break even run rate? A: Require quarterly rev of 150 to 250 mil. Requires GM in mid 20 to 30's. Q: Competitive landscape for grooming switches? A: Outlook good. No cost penalty in adding features in SN16000. 512 X 512 will be important going forward. Seeing some demand for north of 256 X 256 switching. Software piece is really significant also. Transport and switching integrated solution also gives us an edge. Q: Market stalled as carriers wait to try all products? A: No, mostly cap ex. Some early products did not scale, so some are waiting to try. Q: Cost of goods sold, how much of overhead fixed? A: Material cost variable. Fixed cost manufacturing and support. Q: Alternate use of systems installed. Vodaphone is a wireless carriers, are they using other features for backbone services? A: Yes, have added capacity to allow 2.5 and 3G services. Focus is still wireless not wire line. Charging for restoration services and different levels of service. Q: OSMIME certification. Effect of approval on ILEC approval? A: Seeking approval on SN16000 and SN3000. Finished in spring of 2002. Important for ILEC's. Q: Pricing Pressure? A: Is intense and remains intense, no real change. In switching few partiticpants so less pricing pressure. More intense in China than in Europe. Q: Competitive, are customers pushing for more discounts? Q: Breakeven by cash flow? Q: DSO up from here? Extended terms more often or will it be extended? A: DSO could go up 119 level of this Q. Cash flow 65 to 85 mil. 1/2 due to re-structuring. Most of 100 mil paid in 2001. Cash burn at end of year in double digits but down significantly. Q: DSO over next Q. Extended terms with a limited set of customers. Will more ask for extended terms. A: DSO due to one pariticular customer asking for extened terms. Could extend out a few Q's. Q: Any change in how the switch is viewed. Just a DAC or a interest in mesh architecture? A: Vodaphone, BLS mad NTT using mesh architectures. Will take time for idea to take hold. Encourage these companies are deploying these systems. Real traffic analysis show cap ex and op ex savings. Q: Most opportunity next gen architecture? A: Will take times as SONET will not be discarded overnight. Q: Cash burn this Q? A: 100 mil. 27 mil re-structuring. Small single digit for this Q re-struct. Q: How much is left of April re-struct? A: April 59 mil charge, 45 mil paid so far? Q: 10 percent customers? A: Most of rev from Intl and ILEC's. Customers were also 10 percent last Q. Intl rev well over 50 percent. Q: Product A: Most rev from transport in past. This Q more balanced mix of transport and switching. Q: TLAB exit meaningful to SCMR? A: Did not see 6700 to date. Different arch. Q: WMB relationship? A: Large installed base to date. Q: BTB? A: less than 1. Q: Booking same as rev by geography? A: Booking more toward Intl customers. Q: SN10000 in trials yet or deployed. A: SN1000 deployed. Q: Did SN10000 alway have Raman? A: Yes Q; Built in MUX and DMUX? A: Yes Q: On WMB network, SMCR equip works with other transport gear, competes with CORV or complement? A: SN10000 is for the ultra long haul or high capacity for short distances, has a 4000 km range. SCMR and CORV are leading charge in long haul. LU trying to follow. LU, NT and CIEN seen in long haul most often. [Harry: This was a bit of a strange call. They seems more evasive than usual. Some of it due to the fact that the assumptions for their model are changing quite quickly as they pointed out. It sound like cap ex constraints are still a problem at the carriers. They did not feel comfortable in calling for a stablization in spending patterns. The lack of progress in new wins despite the new trials is a concern. The also did not have a comment on a increase or decrease in RFP activity other than to say they expect more trials next Q. Most of their business was international so DSO will remain high for a while. The fact that one customer will account for some much deferred rev due to extended payment terms is a big concern. The slow adoption of mesh architecture is alos a concern despite the cost saving, you only get that after you have deployed more than just a few nodes ie ... you have to be committed to get the cost saving and you have to spend big bucks up front. ]