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Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: Jon K. who wrote (11133)	5/4/1999 9:30:00 PM
From: Luc N.	Read Replies (1) \| Respond to of 18016

What surprises me is that Lutz was quoted in the Ottawa Citizen, I believe, that the numbers looked great? What happen, was he lying or misled by his own people? Should we start calling him Klutz?

To: Jon K. who wrote (11133)	5/4/1999 11:29:00 PM
From: pat mudge	Read Replies (1) \| Respond to of 18016

In the award-winning French movie Dreamlife of Angels there's a scene where the heavy, leather-jacketed nightclub bouncer, Charlie, is lying in bed with his new girlfriend. He senses her unease and quietly asks if everything's all right. "Yeah," she says unconvincingly. "It's --- it's just that I never thought I'd make love to someone fat." He touches his chest and answers with amazing gentleness: "I never think of myself as fat. It's all just vocabulary." Not terribly unlike Newbridge's current situation. If you peel away analysts' expectations and the mystique surrounding the belief a company has to provide a certain set of numbers within a given time frame, you'll find an organization that's growing so fast and changing so dramatically it can't keep up with demand. The "vocabulary" in this situation is the accepted mind-set that says companies must produce in 3-month time segments so analysts can make predictions and more easily gauge stock prices for their customers. It's ludicrous, of course, but that's the way the system works. CEOs all over the world bend over backwards to predict sales, knowing there are factors out of their control --- availability of components and supplies, last-minute order changes, government and regulatory demands, to name a few --- and when they're in an exploding market where the roadmap is being drawn every day, the task is daunting. I could feel the frustration of one analyst who at the end of the call told Alan he sounded too somber given the facts behind the short-fall. Roughly translated, he said, "There's a carry-forward of $115 million which gives you a head- start on next quarter. . . even if you subtract last quarter's carry-forward of $20 million, you have $95 million at the outset. Then if you meet this quarter's estimated $460 --- which you've proven you can do --- you end up with $550. So why aren't you more upbeat?" Alan responded by saying he wasn't willing to be excited because of the weight of the current disappointment. Again, the disappointment comes in not meeting numbers within arbitrary time-frames demanded by analysts. I understand the system, don't get me wrong. But moving away from the current shadow and looking at the facts in the light of day, I see Alan as being the victim of his own success. He's reorganized management, re-vamped marketing and sales, re-directed product development to the demands of target markets, and now less than a year after joining the company, he has so many orders he can't get them out the door. I realize the problem is complex. It's not just manufacturing but defining which product specifications are cost-effective and which aren't. As it is, every customer orders what they want and any changes are made on demand. This makes it difficult if not impossible to keep boards inventoried, especially when orders are coming in at record rates and changes piling up exponentially. One $7 million order didn't ship because of something like $6 thousand in missing parts. And as I'm sure you heard on the call, $115 million in orders were left unmet when midnight struck. The total backlog is far larger, with book-to-bill at 1.2. Uptake on the 36170 was 50% sequentially. Since there was a parts-constraint at the root of last quarter's short-fall, it makes this quarter's miss all the more difficult. If I understood the call correctly, the problems were slightly different, but the ground is just as hard in either case. I don't know if the Street will be forgiving. Considering the fact WAN packet orders increased 35% sequentially when Ascend's were in the 2 - 3% range, and considering the fact Cisco's cancelled its IP/ATM product development leaving room for NN to pick up some of the slack, I'm hoping they're wise enough not to over-do it. I'm also hoping there were a few who noticed NN's third largest customer for the quarter was Bell Atlantic --- behind Siemens (including BT, FT, and G1 which go through their channel) and SBC. To my knowledge there's no contract announcement behind the BEL sales, so this has to come as news to quite a few. In "Only the Paranoid Survive," Andy Grove narrates the darkest moments of the pentium chip debacle that ended up costing Intel half a billion by the time it was over. The situations are different, but the realities surrounding change and the impact they have on a company are similar. "It's like sailing a boat when the wind shifts on you but for some reason, maybe because you are down below, you don't even sense that the wind has changed until the boat suddenly heels over. What worked before doesn't work anymore; you need to steer the boat in a different direction quickly before you are in trouble, yet you have to get a feel of the new direction and the strength of the wind before you can hope to right the boat and set a new course. And the tough part is that it is exactly at times like this that hard and definitive actions are required. Such phenomena are very common. Businesses are about creating change for other businesses. Competition is about creating change; technology is about creating change. The appearance and disappearance of regulations cause further changes. Sometimes these changes affect only a company, other times they affect an entire industry. So the ability to recognize that the winds have shifted and to take appropriate action before you wreck your boat is crucial to the future of an enterprise." Newbridge faces challenges on a global scale as telecommunications shift from voice-centric to data, and on a micro-scale as these changes impact the company from the boardroom to the manufacturing floor. Alan's tough and isn't about to let temporary disappointments cloud the reality of a market set to explode. Nor will I --- Pat