Rough translation of Investir article courtesy of freetranslation.com:
(Graph in top middle of page)
The bang of the Chinese manufacturers of mobile units 2001 2003 (prév.) 2005 (prév.) Chinese market of the mobile
communication (in million subscribers) Sources: Gartner and Chinese ministry of the industry 144 256 358 13% 45% 80%
Leaves Chinese manufacturers of movable telephones on them walked servant
WAVECOM IN BRIEF... Promised C’est, one
not m’y will resume more. C’est the general feeling that predominates when l’on talks about Wavecom to an eventual
investor. The market has again in memory the ruin of two corporations, they also stars of the New Market, that have
a near profile of the one of Wavecom. The first one: Highwave Optical, specialized in the components DWDM (Dense
Wavelength Division Multiplexin or dense multiplexage in length d’onde), a technology that allows d’accroître the
debit of the networks views. She realized, she also, more half of his activity with a single customer: Marconi.
The ruin of the latter as well as the one of l’ensemble of the sector of l’optique drove to a division by 100 of his
capitalization, passing in some months of more one than 4 billions d’euros to less than 40 million aujourd’hui. The
second: Soitec. The manufacturer of silicium on insulating, a promised material to a beautiful future in
l’industrie of the semiconductors, nevertheless patented his technology. A process is some past totally earned
d’être against Silicon Genesis, accused forgery (Soitec having decided to appeal on certain claims of the patent,
after a favorable judgement in first instance). But the evil is done! The market fears that the young French
corporation does not consecrate a lot d’argent to defend his technology and that d’autres corporations try to copy
it. The market envisages therefore the worse one for Wavecom: difficulties of TCL, forgery, new entering… so well
that the corporation not itself « pays », as this was the case for Highwave Optical, 60 time his figure d’affaires,
but less than 10 time our profit estimation net by action for 2002. And this ratio falls to 8,8 for 2003. A very
weak development considering the growth perspectives of the profits (to read cidessus). Of more, 30% stock market
capitalization of Wavecom are constituted trésorerie (9 € by title). That limit the potential one of decrease of
l’action, d’autant that his matelas of liquidités goes gon- fler in the years to come, helped by a free cash-flow of
l’ordre of 50 million d’euros a year in 2003 and 2004. At last, the class of l’action would not lack d’être doped
if the group succeeded in sign an agreement of sales of integrated units to a big world-wide manufacturer of
telephone, limiting the weight of TCL in the figure d’affaires and, to longer term, to diversify its openings
outside of the telephony. Francs. Î; The stock Market envisaged the worse one, remains the better one… Which
health! In a market of the mobile communication squarely marasme, Wavecom, supplier of compact units — together
grouping together components and software — for final, follows without embûche his way. In 2002, his figure
d’affaires should jump of more one than 80%, for s’élever to 600 million d’euros, while the world-wide sales of
mobile telephones would increase of less than 10%. A performance d’autant more remarkable qu’elle is realized to
identical perimeter and qu’elle would allow to release a margin d’exploitation of 12% and a net profitability of 8%.
This success rests on an economical model and an original geographic positionnement. Wavecom chose to consecrate
all its efforts to the conception and the marketing of the « cœur technological » movable telephones. 500 engineers work to the research and development, in order to follow quickly the numerous evolutions technologicals of this sector. The manufacture was confided in three big industrial groups: Thales for the small series or in phase of test, Solectron, in Romania, for the production in big quantity and, recently, Elcoteq, in China. The latter was chosen as third soustraitant to diversify the supplying. In the end, it would have s’occuper of 40% production of
Wavecom. More of the two-thirds of the sales with TCL Wavecom takes advantage thus savoirfaire of big ones under
treating to sell the units to least cost, this that allows him d’abaisser of l’ordre of 20%A year the sale price of its products to function équivalente. The criterion of the price is an element all also determining as the technology for his principal customer, TCL, with that it realizes close to the two-thirds of its sales. In strong growth, the first manufacturer of Chinese telephones (11% of market parts in last August) pierces on a market jusqu’à now controlled to more than 50% by Nokia and Motorola. And, mécaniquement, Wavecom takes advantage success of TCL, for more than 80% final of the one- here are endowed with units Wavecom. Nevertheless, the position is fragile. TCL furnishes itself equally near d’Ericsson and now of Motorola. In the end, these two groups should supply 40% of the products of TCL. Other worry: nothing not said qu’après the strong evolutions technologicals observed currently – passage of the GSM to the GPRS, then to l’UMTS – TCL will choose to make himself units. Conscious of this position, Michel Alard, president of Wavecom, foresees that d’ici three to five years leaves it telephony and of the attending personal (PDA) in the figure d’affaires must be brought back between 60% and 70% and that again customers must be found. The balance of the sales should be realized through d’autres applications. Tracks are explored in the télémétrie (raised meters) and the systems d’aide to the navigation for l’automobile… but this diversification delays. Nevertheless, we bank for 2003, cautiously, on a growth of 17,5% of l’activité, to 705 million d’euros, without holding counts true pierced dune outside the telephony and of the attending personal. The pressure downwards of the price of units would drive to a decline of 0,7 points of the margin d’exploitation, to 11,3%, but the net profit would progress anyway of 12,5%, to 54 million d’euros, owing to the financial products, exits dune
trésorerie net estimated to 145 million d’euros at the end of 2002 and raise of the sales. In the years to come, the growth rhythm should slow down if Wavecom does not reach to diversify itself. Nevertheless, the fall of the prices of the units for the telephony (currently, the average price is to the surroundings of 60 €), if she penalizes the margins of the telephony, must facilitate the deployment towards again unstopped. François Monnier L’avenir of Wavecom passes now by a diversification The growth reservoir of the market of the mobile communication in again intact China, while the walked European and American are now matures. The local manufacturers, of which the principal, TCL, is customer of Wavecom, climb in power. The corporation conceives and markets very compact products – standard units called Wismo –, that integrate the components, software and other necessary technologies to the communication without wire on the mobile communication networks. Wavecom made the choice to work without machines, the whole manufacture is confided in the under treating. We are buyers of l’action, that is promoted as a corporation without growth, c’is-to-to say less than. Nevertheless, this purchase n’est that speculative, for the corporation suffers as a result currently too important weight of his principal customer, TCL, in his figure d’affaires, but this position could evolve.
Our counsels THE TRADE Wavecom 0 50 100 150 200 1999 2000 2001 2002 30,60 the 27-11 Intro. the 11-6 to 13,50 € 174,4
● The growth of the figure d’affaires is to two amount, the margins are consequent and the net trésorerie of debts will attain 145 million d’euros for the purpose of this year. A very rare position currently in the world of the telecommunications.
Strong points
● The corporation succeeds in win l’argent all while diminishing d’environ 20% a year the price of its units. This that gives him a length d’avance on its competitors. Nevertheless, manufacturers of telephones (Ericsson, Motorola, Philips) and specialists of the semiconductors (Texas Instruments and Infi- neon) s’intéressent actively to this market.
● The development is appealing. The corporation pays itself in stock Market as a value without growth, with a ratio classes on net inferior estimated profit to 10 in 2002.
Weak Points
●More of the two-thirds of the sales are realized with TCL. If the Chinese manufacturer stumbles, the economical model of Wavecom can be undermined.
● A diversification outside the telephony requests time to set up itself.
● The sensitiveness to the dollar is penalizing. According to CIC Securities, a decrease of 13% dollar in comparison with l’euro drives to a decline of 11% figure d’affaires and of 25% result d’exploitation.
WAVECOM SOME AMOUNT... (lower middle graph with my guess as to the financial terms)
(In million d’euros)
2001 2002 (is.) 2003 (is.) 2004 (is.)
Amount d’affaires 323 600 705 780
Result d’exploitation 3 72 80 85 (Operating Profit)
Margin d’exploitation (in%) 0,9 12 11,3 10,9 (Operating profit %)
Results 9,3 48 54 60 (Net profit)
clean Funds 122 170 224 284 (cash flow??)
net Trésorerie 131 145 197 250 (net cash??)
Profit net by action (in €) 0,62 3,10 3,48 3,87 (EPS)
PER (in number of times) 49,4 9,9 8,8 7,9 (P/E Ratio)
Bottom article (comparing other French high tech companies)
Promised C’est, one not m’y will resume more.
C’est the general feeling that predominates when l’on talks about Wavecom to an eventual investor. The market has again in memory the ruin of two corporations, they also stars of the New Market, that have a near profile of the one of Wavecom.
The first one: Highwave Optical, specialized in the components DWDM (Dense Wavelength Division Multiplexin or dense multiplexage in length d’onde), a technology that allows d’accroître the debit of the networks views. She realized, she also, more half of his activity with a single customer: Marconi. The ruin of the latter as well as the one of l’ensemble of the sector of l’optique drove to a division by 100 of his capitalization, passing in some months of more one than 4
billions d’euros to less than 40 million aujourd’hui.
The second: Soitec. The manufacturer of silicium on insulating, a promised material to a beautiful future in l’industrie of the semiconductors, nevertheless patented his technology. A process is some past totally earned d’être against Silicon Genesis, accused forgery (Soitec having decided to appeal on certain claims of the patent,
after a favorable judgement in first instance). But the evil is done! The market fears that the young French corporation does not consecrate a lot d’argent to defend his technology and that d’autres corporations try to copy it.
The market envisages therefore the worse one for Wavecom: difficulties of TCL, forgery, new entering… so well that the corporation not itself « pays », as this was the case for Highwave Optical, 60 time his figure d’affaires, but less than 10 time our profit estimation net by action for
2002. And this ratio falls to 8,8 for 2003. A very weak development considering the growth perspectives of the profits (to read cidessus). Of more, 30% stock market capitalization of Wavecom are constituted trésorerie (9 € by title). That limit the potential one of decrease of l’action, d’autant that his matelas of liquidités goes gon- fler in the years to come, helped by a free cash-flow of l’ordre of 50 million d’euros a year in 2003 and 2004. At last, the class of l’action would not lack d’être doped if the group succeeded in sign an agreement of sales of integrated units to a big world-wide manufacturer of telephone, limiting the weight of TCL in the figure d’affaires and, to longer term, to diversify its openings outside of the telephony. The stock Market envisaged the worse one, remains the better one… other necessary technologies to the communication without wire on the
mobile communication networks. Wavecom made the choice to work without machines, the whole manufacture is confided in the under treating.
(Lower left stock price graph)
investir.fr |
