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Technology Stocks : Trimble Navigation -- Ignore unavailable to you. Want to Upgrade?

To: David who wrote (2626)	7/23/1998 3:45:00 PM
From: Yin Shih	Read Replies (3) \| Respond to of 3506

Listening to the conference call it appeared to me that there was a lot more institutional interest than in previous conference calls. In the past, conference calls have had 3-6 questioners. This time around there were perhaps 10 questioners, two of whom made a point of discussing shareholder value, one of whom questioned the structure of the board of directors, one of whom raised the questioned the viability of the GPS business, one of whom asked about industry consolidation, and of course detailed questioning on gross margins, expenses, and so on. The question and answer period also went on for about half an hour - much longer than usual. Basically a lot of the same questions this board has raised and been frustrated about. Hopefully, management got the point and will be less rosily optimistic and more active in the future about making money and constraining further surprises. On the other hand, I was disappointed that Trimble didn't come to the conference prepared to say more than that he was "frustrated" too and was continuing to work to turn things around (he can't do anything about Asia and Aerospace is supposedly back under control). In essence he believes that the "GPS/Trimble isn't a good business" comments are unwarranted and that taking short term action to bring a few $M to the bottom line would be "eating the seed corn". I'm somewhat sympathetic to that argument, but I think he would have done more to convince some of the skeptics if he had a pre-emptive announcement or two about signing up some heavyweights in the telecom/computer industry as board members, for example. Beyond the hard numbers, here are some specifics for those who missed it: * Asia sales declined due to high Yen/$, offset slightly by increased sales to China * They are worried about further Asia exchange rate problems and possible devaluation, but such problems should be contained/limited as Asia only represents about 10% of revenues * A software/technology customer went bankrupt in the quarter resulting in a decline in software sales (perhaps this is where the "high leverage" impact of the $5M lost/deferred sales came from as software costs of goods is low) * Aerospace margins hurt overall margins - without aerospace, margins were about 52% * Poor aerospace margins were blamed on a) revenues included intermediate milestones on contracts where profit was on the final milestones, b) buildup in anticipation of a business that didn't occur or was delayed, c) some obsolete inventory * They expect R&D, G&A numbers to be flat for the balance of the year * There was a 350,000 share stock repurchase this last quarter, they may buy back more if warranted but they otherwise believe their cash level is about right * Adding new board members has a "higher" priority now (but no committments) * Auto-PC is still a "dream" in Trimble's opinion, some structural issues need to be dealt with before it is as viable as straight Car-nav or Car-nav + cellphone * Trimble no longer sees Motorola or Rockwell as "problems", but sees increasing pricing competition from some of the current competitors including Leica (which presumably affected their 4400 business as he mentioned price pressures there specifically - though he expects 4700 and 4800 sales to be good for the near future) * Top line estimates for the year are about 320M +/- 10M * One analyst asked if a revision of earnings to 19 cents for the year was "about right" - Trimble's response was effectively that was too low, but wouldn't say how much too low