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

To: rascalbythesea who wrote (13652)	5/21/1999 10:17:00 PM
From: Sector Investor	Read Replies (1) \| Respond to of 42804

Hi Benny, Let's discuss visibility of earnings a bit. The street loves this. There is nothing better to bring investors on board and stay there. ANALysts don't have to do much of anything and they look like gurus, - always right. One major item that allows a company to provide good visibility, quarter after quarter is long term contracts. Except for the LOIs with China and the MRV side of the business, we don't know about any of these right now. Building $70+ million in sales each quarter out of many, many small sales can lead to a lumpy revenue stream and low visibility. I went through this with ASND - boom quarters, followed by tight quarters, followed by tighter quarters. Analyst expectations get too high, quarters get increasingly backended trying to make their numbers, and sooner or later the company misses. We know all about what the street does to you if you miss. "@$#%^&*() stupid company can't even execute." "We need a better CFO" "Management can't be trusted" Big MO shifts. Institutions leave. Price plunges. Back to long term contracts. When we were a commodity niche switching vendor, nobody gives you a long term contract. Why should they? The technology changes too fast to rely on just 1 or 2 suppliers - especially for products viewed as commodities. But the carrier market is different. It takes a long time to build out your infrastructures. You need LOTS of SCALEABLE and COMPATIBLE equipment, spaced out at somewhat regular (AND CONTROLLABLE) intervals. The products are NOT commodities, and once you get in with good products, and provide good support to keep the customer, you can have a steady revenue stream for a long time. This is the key. First you get the carrier class products, then you get your products in as many doors as possible for BETA, then you try to win your share of contracts, then a steady revenue stream begins, then you can begin to structure your quarters. If one vendor pushes a shipment back a month or two, you can probably get another to take a bit more right now to compensate. MRVC is moving in this direction. They have stated they are going after larger wins. China could be great. A few carrier wins (even second tier) would be WONDERFUL for visibility. People keep talking about EXECUTION - like it's purely a fault of management. It isn't, because they are living in a lumpy environment right now, without much control quarter to quarter. Expectations for 1998, just got too high. If this same management can win a few long term contracts, visibility will return, and we will think these same guys are geniuses (well OK, maybe not <g>) Now management can be faulted for not correcting these expectations earlier - but these guys had never missed for 34 straight quarters! That is 8 ½ YEARS. They just weren't thinking that they might miss, until it was staring them in the face - and Noam was in Italy the week before. He just got back the day they preannounced. I think they reacted too hastily, announced on the worst market day of 1998, and didn't think about a conference call, until the market lopped our heads off. Visibility? Thy name is long term contracts.