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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: Sector Investor who wrote (7259)	2/25/1998 12:53:00 AM
From: Eric L.	Read Replies (1) \| Respond to of 42804

The same Dow Jones report but reads a little different...Stronger staements form Co...... MRV Commun Shrs -2: Analysts See Selloff As 'Overreaction' Dow Jones Newswires MRV Communications Chief Financial Officer Edmund Glazer attributed the inventory buildup to a decline in original equipment manufacturer switching sales, the company's move to shorten its lead time to a few days from three to six weeks and the roll-out of a new product late in the quarter. Glazer said OEM sales were hurt by two major OEM customers - Newbridge Networks Corp. (NN) and Digital Equipment Corp. (DEC) - who decided to get out of the switching business. As a result, OEM switching revenue accounted for only 10% of the company's total revenue, down from 20% the previous quarter. But Glazer said the soft sales were offset by stronger international sales. The financial chief noted that efforts to cut the lead time are expected to make the company more competitive in the long run and that the temporary inventory buildup was necessary to prepare for the new shorter sales cycle. The introduction of a new product late in the fourth quarter also contributed to the inventory glut as few shipments were ready to go before year's end. Glazer predicts inventory levels will "significantly" decline in the first quarter, and receivables levels will improve, but not dramatically. The executive explained the receivables increase was due to higher international sales. Traditionally, he said, European sales have longer cycles, typically 180 days, and therefore receivables grow. As the company is changing its sales mix, with more emphasis on international sales and less on OEM networking sales, he said receivables are likely to remain high. International sales accounted for 65% of total revenue in the latest quarter, up from 58% in the third quarter. The company has little exposure to turbulent Southeast Asia. Glazer added the company's recent decision to acquire Xyplex Networks will allow it to enter the wide area network and remote access server markets, which is expected to boost sales. Glazer said he believes the company's "opportunities for growth will enable it to meet analysts' estimates for 1998." Wall Street currently pegs the company's 1998 earnings at $1.24 a share, up from 89 cents in 1997. Despite the inventory and receivables issue, Volpe's Senan reiterated his strong buy rating and boosted his revenue projections for MRV Communications to $260 million from $251 million in 1998. Gruntal's Rao speculated Tuesday's selloff was a combination of profit-taking and nervous short-term investors "who shoot first and ask questions later." He said some "portfolio managers don't want the whole nine yards, they're looking for a quick sound bite and then they're on the phone selling it." He added that they often "sell it and then buy it back a month later." -Janet Morrissey; 201-938-5400 By Janet Morrissey NEW YORK (Dow Jones)--Despite posting robust fourth-quarter and year-end earnings, MRV Communications Inc. (MRVC) shares fell 17.4% Tuesday as investors reacted to news its inventories and receivables had doubled from year-ago levels, analysts said. High inventory levels and large days sales outstanding, or DSOs, are typically red-flag warning indicators for market watchers, analyst Vivek Rao of Gruntal & Co. said. But for MRV Communications, which, on Monday, posted its 32nd consecutive quarter of earnings and revenue growth with all quarters meeting or beating analysts' expectations, the inventory and DSO escalation caught investors by surprise. "(MRV) has a long history of reporting terrific numbers," but market watchers get jittery when inventories grow at a higher rate than revenue, said Rao. The Chatworth, Calif., company's revenue rose to $165.5 million in 1997 from $88.8 million in 1996, while inventories rose to $42 million from $18 million during that same period. Accounts receivable escalated to $47 million from $24 million a year ago, Rao said. DSOs rose to 89 days in the fourth quarter, up 12 days from the previous quarter, according to Amar Senan, an analyst at Volpe Brown Whelan & Co. But Rao said he believes the problem is short term and described Tuesday's selloff as an overreaction. "This is a company with a strong track record" and a reputation for managing growth well, he said. Rao is taking a wait-and-see approach to see if the balance sheet problem persists in the first quarter. Senan of Volpe Brown Whelan concurred that Tuesday's decline was an overreaction. He noted the developer, maker and seller of fiber optic components and computer networking devices gave specific reasons for the inventory and receivables buildup. MRV shares on Tuesday fell 5 1/32 to 23 15/16 on Nasdaq volume of 2.4 million, compared with average daily volume of 424,800. Briefing Book for: DEC \| MRVC \| NN \| T.NNC