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Technology Stocks : Advanced Fibre (AFCI) ** IPO -- Ignore unavailable to you. Want to Upgrade?

To: Michael Watkins who wrote (1867)	2/24/1999 7:26:00 PM
From: E_K_S	Respond to of 3299

Hi Michael - Based on Nationsbanc Montgomery's neutral report, we can conclude that domestically AFCI is on track (in their mind) but are slipping with their international orders. From their report:"...Although the initial order flow at the beginning of the quarter was strong, anticipated orders from international accounts have not materialized at this point in the quarter..." -International orders are below projections. The reduction in revenue is a result of slower orders from Mexico, Venezuela and China. Management did not comment on the anticipated international order level for Q2 or 1999. ====================================================================== We can conclude from Nationsbanc Montgomery that AFCI is indeed focussing on the SBC account. The appointment today by AFCI of Mr. Welby (as I previously posted) shows that AFC wants and needs the formal report to SBC to be approved without any conditions. Once approved new orders would begin. The time line seems to be in agreement with SBC's PUC & FCC approvals which we know will take "...more than 30 days..." (see my earlier post on SBC yesterday). From the Nationsbanc Montgomery report: "...-Domestic sales remain on-track for the quarter. As mentioned in previous notes, we believe progress continues at AFCI's target RBOC account (SBC) and Winstar. The UMC-1000 has completed its evaluation in SBC's labs with positive reviews. While order levels from SBC could increase now that product evaluation is completed, a formal write-up of the review, culminating in product qualification, is not expected before the end of March..." ==================================================================== I am a bit concerned long term with the Winstar contract that AFCI received earlier this year. Although it is a multi-year contract, Lucent is the main component integrator and AFCI is only identified as "the vendor of choice". Lucent has the option during the term of the contract to supply Winstar the "local loop carrier" component IF they can meet the vendor qualifications. AFC may be ok for 1999 but it is unclear to this investor if FY 2000 and forward if AFC will receive all the Winstar orders. Lucent is providing the financing for the complete Winstar project and if Lucent can manufacture an AFCI equivalent product, they will get these future orders. Lucent could buy AFCI but I understand they are presently in development of a similar product. From the Nationsbanc Montgomery report: "... Winstar revenue will be recognized in the quarter, but likely generate less than 10% of total sales (Winstar was a 33% customer in 4Q98). Given Winstar's aggressive plans to build a nationwide network, we believe it could be a 10% customer for AFCI in 1999..." ===================================================================== In summary, Mr. Welby's appointment today as V.P. of Marketing (IMO) was AFCI's management way of telling SBC (and possible other RBOC customers) that they intend to receive their "product qualification" certificate soon. They are ready now to provide the marketing and technical build out expertise to deploy their local loop carrier components. All they need is the the go ahead from SBC. AFCI's new V.P. has shown that he not only understands the technology but can deliver the systems as shown by his employment with Lynch Communications. Anyway, this is the way I see it and I continue to hold my AFCI. EKS