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Technology Stocks : CrossKeys Systems Corp [CKEY and CKY/TSE] -- Ignore unavailable to you. Want to Upgrade?

To: Yarek Szolomicki who wrote (426)	3/1/1999 6:32:00 PM
From: pat mudge	Read Replies (4) \| Respond to of 792

Summary of my conversation with top management: The work with Siemens' 36190 was expected to wind down in Q1 and Q2 and was brought forward by new managers at Siemens who wanted to bring the work in-house faster than the earlier management had planned. The original contract was for $11 million and CrossKeys has delivered over $20 million. "Our track record is stellar," CrossKeys' CFO said. Since they were getting signals from two sides of the project, they had to make the call they did. It's possible Q4 could be better than indicated but they want to be conservative with estimates. The fact they didn't win two CPQ bids --- one on price, the other to a custom solution --- makes the impact of Siemens' slowdown more severe than it might have been. There are many good opportunities in the works but they won't generate revenues to cover the short-fall. Analysts are predicting the next two quarters will show negative top line with break-even earnings in Q4 and slightly positive in Q1. Could you do a run-down on products? CrossControl is "lumpy" and will show opportunities in the Q4/Q1 time frame. Resolve SI --- SLA management --- is a high-end product that has genuine interest from telcos, but because of more pressing demands, it's been one they've found easy to defer. [Sort of like selling butter before the bread. . . . Resolve NI is the bread.] NI is a network monitoring product that has already been requested for Beta. Roll-out in Q1. Some want NI first and then SI. NI focuses on the network while SI focuses on differentiators for customers. Both versions now have IP abilities added. Resolve is a suite of products that's gaining a lot of attention. The product is trending up. Marketing to CLECs as well as Incumbents. We may find a similar pattern --- that they need NI first, then SI. The same in Europe? Selling CrossControl and Resolve. . . have a lengthy list of prospects for Resolve. Telcos are spending 2 or 3 days with us. Lots of interest. Status of Ascend? Ascend is a channel partner and the relationship is moving nicely. They're marketing together and have 4 or 5 joint sales opportunities. Does Lucent have a Resolve-type product? We understand LU will bid Ascend ATM switches [and] the software is interoperable. Indications are they don't have a competitive product. Is NN a negative? It's a misperception. A Newbridge win opens doors that often lead to sales several quarters later, particularly with ATM and FR. The Ascend relationship has proven the NN connection doesn't keep competitors away. What about new Partners? Many prospects that could materialize by Q4/Q1. How is the analyst community reacting [to setback]? Of the analysts who follow, one has a strong buy based on price, a couple say buy on weakness --- "cautiously optimistic" -- of the two who were holds before, one maintained a hold and lowered estimate, the other moved from hold to neutral. Was that a Canadian firm? Yes. What's the status of the locked shares released in December? We put together a 600K block that went off around Dec. 18/19, and some sold on their own. Total was 900K. The float is now around 9 million. Will management buy back shares at this price? No definitive plans, though it's something we will look at. There's some concern it would reduce the float and that would have to be considered. What's the morale of the management? There's relief the negative news is out. The company is solid. Management is strong. We have a healthy cash position. * * * * I'm glad the Siemens' business was a planned exit. The fact they wanted to speed up the process has nothing to do with CrossKeys, and, who knows, they could even ask for help at a future date. In response to customer demand, the Resolve suite of products now includes IP along with TDM, ATM, and FR. These are high margin products that will lead to sustainable earnings a couple quarters out. I don't know where the stock will settle, but I'm certainly not selling and will look for a place to add. As most know, I'm pretty patient. Peter Lynch says his best positions were those he held 3 to 4 years. Pat