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Technology Stocks : CPCI - great earning , BARRON's suggest -- Ignore unavailable to you. Want to Upgrade?

To: Aaron Cooperband who wrote (407)	11/5/1997 4:00:00 PM
From: Pete	Read Replies (4) \| Respond to of 586

Although the earning is good, the book value has dropped from $9.8 to $8.9. I will watch it a little longer before jumping in.

To: Aaron Cooperband who wrote (407)	11/6/1997 10:17:00 AM
From: csm	Respond to of 586

Conference Call Notes: Conf Call Nov 5, 1997 CFO * Q4 Film/video was 40%, Satellite/Telemetry 30% of sales. Earnings up 16% from last year. * '97 Film/video 43% Sat/Tel 34% vs 13% in '96. * No one customer accounted for >10% in the Q. In '96 Sony was 18% and Avid 11% of sales. In '97 US Navy was 10% of Sat/Tel sales * Reduced earnings in Q4 vs Q3 were due to delayed orders due to adaptation of the marketplace to fiber (more later) and continuing problems with SGI. Mgmt believes these are short-lived problems. * New products accounted for 40% of sales in '97. * '98 sales projected at $48M by analysts. Company comfortable with this. Expects gross margin in the 45+% range, expenses 32-34% (35% in '97). * The capital that has been spent $2.7M was on production equip. President Q4 downturn * Ddue to teething problems with fibre channel connectivity. These have been resolved and demonstrated at trade shows. Competitors have yet to encounter and work through these problems. CPCI worked closely with its OEMs to help them get through the issues. * OEMs are coming back a bit but Kodak will not. They are selling their unit (medical imaging?). * SGI had another difficult Q. SGI had lost its focus on CPCI's markets but the focus is returning. CPCI is staying very close to SGI and they are working together. * Halo (arrays for SUNs) will play a greater role going forward. New Products * Halo for SUN. Very quick success. Does not compete with SUN's announced RAID 1&2. * Have NT certification on the 7000 array. * RAID Recorder will provide new growth opportunities. Customers are waiting for it. * VL (ValueLine) arrays are designed for scalability, not raw speed. Good for oil & gas sector. Markets * Entertainment. Excellent growth still. Customers include Industrial Light and Magic, Sony, Warner, Disney. Smaller companies are becoming more significant. * Broadcast. Most growth in smaller customers. Customers include Avid, HP, SGI and DEC. * Telemetry. Good growth. * Medical and Pre-press. NT connectivity will bode well here. * Adding resellers in Japan and a big UNIX VAR in Europe that will provide access to a much larger reseller group. * Strengthening sales channels. Products are well accepted. Cash * Pursuing acquisitions and talking about stock buy-back but stock prices too volatile to pursue at this moment. (They prefer an acquisition to stock buy-back) Q's and A's Q Is Q4 decline going to affect Q1? A Expect $10-11M in revenues. Some lingering problems with Kodak and SGI but OEMs & integrators are getting back on track . Feel Q4 was an isolated down Q. Q How big a customer was Kodak? A Less than 10% in '96 but in top 10. Company is factoring them out of their plans. Q Asian exposure? A Singapore - expect 100% increase in '98 (small). Strengthening relationships with resellers but most sales are in Australia, India and China. Expect Japanese sales to increase. Asia accounts for 10-12% of sales. Q Will gross margin be maintained at these levels? A Going forward the 6500 is a big story and the VL line has superb margins. VL takes strengths of 6500 & 6900 together for those who don't need real-time. Q Drive prices? A 9 GB SCSIs have been steady but ATAs have been dropping. Q New drives? A Company will ship some arrays with 18GB drives within 90 days. Q How sig is fibre channel A Expect fibre channel arrays to be 35-45% of revenues in '98. 6500 to be 20% due to improved distribution. Fibre is used by entertainment and sat/tel markets. They should account for 60% of revenues in '98. SGI and SUN provide equal opportunities for CPCI from here on. The SUN opportunity is new. The company has done a lot of market research lately and will soon release their projections, by platform, for '98 and beyond. The NT market is OEM driven. Entertainment is SGI. Sat/tel is split between SGI and SUN and medical/pre-press is NT. Q Can you expand production? A We're only running one shift. Capacity is not as big an issue as planning together with suppliers and customers. CPCI has intensified its efforts to jointly plan. Some clients (entertainment) expect overnight delivery (!). Q Acquisitions? A Looking at ways to complement what we offer to our suctomers. Do more integration of our products. Controllers that might exclude competitors could be attractive. Q One more on connectivity. A Kodak went to fibre but the sales weren't there. 2 customers in digital bdcst started production but then slowed down. Both are back on track now. Other OEMs have resolved their issues. OK. That's it. I'll leave a discussion of what it all means except to say that management sounds very capable and deliberate. They are taking steps to make sure they are well positioned for the next couple of years. They are at the leading edge and have encountered some problems that others will yet encounter, but they are still well ahead of anyone else. Stuart.