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

To: Robert G. Harrell who wrote (10644)	9/2/1998 5:41:00 PM
From: 45bday	Read Replies (2) \| Respond to of 42804

This company was recommended to me today. Never heard of it before amd know nothing at this pt. other than the fact that their price is off a tad. Could someone who has been long for awhile please share with me whether they feel taking the time to research this one will be time well spent or is it another co. with accounting headaches and not much positive going on. There a lot of 6 stocks arounf these days with decent stories. Thanks in advance and good luck to all.

To: Robert G. Harrell who wrote (10644)	9/3/1998 8:34:00 PM
From: Robert G. Harrell	Read Replies (1) \| Respond to of 42804

Welcome back Dan. Here are my additions to Bruce's summary of the conference call with a minimum of duplication I hope. Awkward syntax is theirs. Switching, especially 10/100 is under severe competitive pressure. Mrv has "two major R & D programs with very significant potential contributions to revenue, earnings and value to shareholders." These are dynamic dense WDM optical networks and project Aranea (sp?), the carrier class terabit router. In the past they have been able to transition seamlessly from product to product. "However, lead time in selling and developing optical networks and routers aimed at carriers, both CLEX and ILEX, now appears to be longer than anticipated. Fortunately, the markets for terabit routers and optical networks are just beginning to emerge and are not expected to go away." Priorities: 1) R & D. Must invest in infrastructure, capital equipment and managerial resources. 2) Profits 3) Investor relations. They are " putting in place an infrastructure that will be a pleasant surprise." 4) Sales and marketing infrastructure. They are hiring personnel specifically with expertise in carrier sales and the kinds of channels and partnerships that fit the carrier buying habits. Expect this to result in strategic partnerships in things like DWDM. "An example of a technology that is expected to be adopted by strategic partners is our new WDM technology. In June we announced new wave division multiplexing products as well as a technologic breakthrough the dynamic dense WDM A wave division multiplexer also known as WDM increases the number of signals that can be sent over a strand of fiber distributing more information over an existing cable plan. Our first product in this line incorporates WDM technology into the gigabit switch router. This is a plug in blade that transmits all gigabit ethernet channels over one fiber pair. To the best of our knowledge, the gigaframe switch is the only gigabit switch incorporating WDM technology. We will also introduce a stand alone version of the product. The breakthrough technology that we announced will result in the creation of next generation dynamic WDM as opposed to today's static WDM. Todays applications are transporting signals on a point to point basis. A metropolitan ring is implemented by going from point A to B, B to C and so on. MRV's dynamic WDM will allow transmission from any point to any other point on the network simultaneously. The coding will be done optically. We plan to start demonstrating this technology early next year with revenue commencing towards the end of the year. However, inbetween we hope to be able to report to you milestones in endorsements of this technology by key customers." GSS(?) products are competitive where long distance fiber applies but are less competitive in other applications. They are working to improve them. They cannot reduce or drop the low margin/commoditized fixed configuration and low end products because they are essential components of higher end products even though they are under pricing pressure. For the last 6 months their financial targets are 10% R & D and 22% S,G& A. The opportunity to achieve cash flow neutral to slightly positive is good. Q. In the enterprise class arena are they being invited to the party? A. Yes. They are getting their fair share of large size orders -- more than they have been getting before. Q. Is price the predominant feature in high end? A. In the chassis base arena the "sales cycle is longer" (This idea was repeated several times.) Features and support are more important. DWDM product is slightly ahead of schedule. They will demonstrate early in the year but will not contribute materially until the end of the year. Long product adoption cycle. Terabit router--no demonstration before the end of next year. WDM for stand alone box will ship in 4Q 98. Q. (In discussion of DWDM product) It will scale up to 20 wavelengths? A. (Noam) It might go beyond that. Operating margins in low teens for at least a couple quarters. Q. Since gross margin of the first half ran about 44% and ...(changes from press release)...could gross margins be well below 42%? A. YES Q. about channel inventory. A. In North America most sales are single tier or direct so there is no issue of channel inventory. Internationally they have 17 or 18 sales offices so there is also very little channel. Q. Do you expect a 4Q revenue gain over 3Q? A. Yes. should achieve sequential revenue growth. (NOT EARNINGS as stated in item 6 in Bruce's summary.) Q. Does the shortfall have more to do with price competition rather than seasonal factors? A. Yes The board has discussed a poison pill to force any potential acquirers to talk to the board first. Noam's closing remarks verbatim (to the limits of my abilities--terrible audio): "I think to close I just want to reiterate that do to the coming economic and market trends we cannot necessarily provide the assurance that even the revised estimates will be met. However I can give you the full assurance that management and all the employees of the company are 100% united and committed in our determination to succeed . We view this situation as an opportunity to improve and rebuild our strength. And we know that while we are all technology people our business is adding value to customer networks and generating profit in the process. There are a thousand things we can do to build value and we are now going to pursue many of them vigorously. Uh with that I'd like to thank you for your time and I look forward to reporting to you meaningful progress in the future. Thank you very much."