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Technology Stocks : ODS - Optical Data Systems (NASDAQ: ODSI) -- Ignore unavailable to you. Want to Upgrade?

To: Arrow Hd. who wrote (162)	4/19/1999 6:43:00 PM
From: Arrow Hd.	Read Replies (1) \| Respond to of 258

Click on NEWS and you can read the release. I also listened to the CC and the bottom line is that they are still on target with regards to their strategy and time line as explained in their restructuring CC back at the end of last year. The only mild disappointment was the EPS at negative 12 cents versus a street concensus of negative 11 cents so they were a penny under but ODSI has never claimed to be on track for first quarter profitability and this issue was not raised during the Q and A session by any of the analysts so I don't see it as particularly important. Other points of interest from the prepared CC text and the Q and A. 1. Numbers improving. Revenue up 4Q 98 to 1Q 99. Gross Profit Margin up same period. Expense reduction from 11 million to 8.7 million same period. Restructuring efforts paying off and executing as planned. 2. CEO stated "return to profitable business model in 2Q 99". This is what we have been hearing all along and it is still their position. How will they get back to profitability in 2Q? A. They came into the second quarter with a 12.3 million dollar backlog. B. Both the switch products and the security software products will increase sales during the upcoming quarter. C. Newer products carry higher GPM so GPM will increase as shift from old products to new products continues during the quarter. D. SAIC started to install high performance switches and is introducing ODSI throughout their customer set (keep in mind that SAIC is a 4 billion dollar private company who does 2 billion per year in systems integration) and this opportunity to sell into the SAIC customer set is meeting or exceeding all expectations on an account basis. E. They are expanding their partnerships and sales channels and are very optimistic with their relationships with SGI, SUN, CPQ, and HP. The NCR relationship is growing significantly. Their security software solutions are being partnered with major accounting firms. They are bundling their switches with high end workstations from these vendors. F. ODSI expects to continue to get business from their old legacy products. They expect an order from AT&T this week for an an additional number of switches which will be added to an existing network supplied by ODSI which will cause "a significant uptick this week for old products". This is obviously an important order and appears to be a 2Q sell and install cycle deal. Also, considering their older lines of business may have already incurred most of the necessary writeoffs, this business may be able to use an incremental or "to go" pricing methodology which increases profitability. 3. Q's and A's: First question was on top line growth. ODSI went over the numbers again showing 1Q 99 growth over 4Q98. Also, mentioned that historically 2Q and 3Q is when they do most of their governmental business and mentioned a deal closed with the Air Force. Mentioned also ISPs and the pilot programs underway and other projects with service providers to reinforce they are on the right track for sustained top line growth. Second question was focused on old product contributions. Focused on flat revenue excepting the bubble with the big imminent AT&T order. Third question had to do with revenue cross over where YOY improvements noted. Answer was 99 revenue will exceed 98 revenue in 3Q 99 on a YOY basis. Fourth question focused on competition. ODSI switches are the fastest in the industry and this is a major advantage where bandwidth is an issue (and where isnt it an issue!). Their security software solutions are total solutions that are integrated and packaged with other solutions from ODSI service provider business partners versus just niche modules from other firms that dont address the total picture (my comment; this is probably over hyped but relatively true in the sense they do have a total solution. There are other total solutions available though). There were other questions but were either already answered in this post or too irrelevant to bother posting to such a sophisticated audience (thats all of you here on SI!). So, to summarize: Executing the plan, revenues increasing, improving GPM, expenses declining, expected profitability in 2Q 99, expected significant order this week, excellent backlog going into 2Q, very good forward outlook, and revenue cross over by 3Q YOY. We may get some upgrades out of this and test the old 99 high of 5 and change in the next few weeks. This is a best efforts on my part to report objectively what I heard. I am long many thousands of shares and continue to hold. Any comments appreciated. Thanks in advance.