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

To: Eric Jorgenson who wrote (10584)	9/1/1998 4:29:00 AM
From: Bruce L	Read Replies (3) \| Respond to of 42804

Conference Call Summary No one had posted - from what I saw - any kind of comprehensive summary of the CC, so here is mine: l. They estimate a decline of revenue for Q3 from previous estimates of 10- 15%. Noam mentioned that the problem primarily centers in Europe where July and August are historically slow sales period. The surprise he said was their salespeople in the field now do not expect the kind of September pickup they had previously forcast. He also said that until recently their Asian sales had not been impacted; now they are. (He didn't say how big Asian sales were proportionately, but my recollection from the earlier CC was that it is small.) 2. On an analyst's question Noam acknowledged that competitive pressure in the "low end" of their product line also is hurting. He said that 3COM and BAY had been the chief competitors but that recently CSCO and INTC have moved into this field. He said that low end products that he defined broadly to include some pretty sophisticated (to me) stuff made up some 30% of the company's revenue. 3. Noam said that delays in their WDM products also played a part in the preannouncement. Now, they expect to ship WDM in Q4 but no significant revenue until Q1. 4. Noam said their fibre component business is strong and they expect this to be a bigger component of revenue in Q3. They are building new foundries for it. 5. Noam acknowledged that in retrospect it was a mistake not to have today's CC immediately after the preannouncement. In the interim, it caused wallstreet uncertainty. (AMEN!!!) 6. Either Noam or the CFO said that they expect sequential earnings growth for Q4. 7. The company has no channel inventory problem ( a la 3COM) in that no single customer makes up more than a small part of MRVC's business and they have 17-18 offices worldwide to sell direct to the end user. 8. The CFO (Edmund) said that the company's cash and securities remain essentially the same as the last report and that book value of the company is about $6.50. (It seemed to me that the CFO got emotional at this point and said that of course this figure didn't come close to valuing the intellectual property that the company has created. 9. The company's "carrier class" products will not ship until late 1999 with significant revenue not until the following year. There may however be endorsements of the product and Noam said that 2 carriers and "one large entertainment company" are scheduled to start beta testing of it in 1999. 10. R&D and Sales and marketing expenses as a % of revenue will increase. Noam said that the company's new products require higher marketing costs and more post-sales suport. He said that this "infrastructure" was now in place; that MRVC has hired salespeople with experience and connections in the carrier field. 11. The CFO said that the recent 100 million (?) private convertible placement would cause no additional interest expense for the company because the interest earned on the money substantially covers the interest expense. 12. Noam, without giving particulars, said that the Board is considering a stock buyback and that steps have been taken to improve communications with Wallstreet. FWIW my impression was that Noam and the CFO were in honest shock at the collapse of share price - not defensive as one poster indicated. Noam said something to the effect that there are a "thousand ways" to increase profit and that they would take every one they could to accomplish this; that the employees of the company were united towards this goal. He said that market conditions and competition may possibly prevent them from achieving even their revised earnings estimates but that this was accurate at this time. I considered the CC cautiously upbeat. And I still like management - even if they are inept in their wallstreet dealings.