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

To: Terry Nolan who wrote (11692)	6/2/1999 2:06:00 AM
From: pat mudge	Read Replies (3) \| Respond to of 18016

Terry --- On an evening when I'm tempted to side with Serge, your comments are a healthy call to reality. The technology is solid in spite of the recent difficulties impacting the bottom line. I'm glad the company's planning to turn on the marketing machine around SuperComm, a few days from now. There's a lot good that needs to be said. Pat

To: Terry Nolan who wrote (11692)	6/2/1999 7:08:00 AM
From: Glenn McDougall	Respond to of 18016

Newbridge says logistics well in hand President predicts big profit gain in fiscal 2000 James Bagnall The Ottawa Citizen Newbridge Networks Corp. president Alan Lutz said yesterday his company has made considerable progress in solving the logistics and manufacturing bottlenecks that hurt fourth quarter results. "We have swarmed all over this with our information technology organization," Mr. Lutz said during a telephone conference call and Webcast with analysts and investors. "I would like to think that the supply-chain issues will be beyond us in a reasonable period." Mr. Lutz was confident enough of putting production issues behind him to tell analysts that their consensus estimate for fiscal 2000 (ending April 30) -- 97 cents U.S. per share according to First Call -- was too pessimistic by "a nickel or so." If Newbridge actually delivers a $1.02 U.S.-per-share result, this would result in a 73-per-cent gain over fiscal 1999's final results, which were published yesterday. Mr. Lutz added that he was "comfortable" with predictions that Newbridge sales would top $2.2 billion in fiscal 2000. Excluding one-time hits and gains, Newbridge posted a $161.8-million net profit (91 cents per share) in fiscal 1999 compared with $171.3 million (98 cents) the year before. Revenues jumped 10.5 per cent to a record $1.79 billion. Fourth-quarter earnings were $32.5 million (18 cents), up slightly from $31.9 million (18 cents) during the same period a year earlier. Sales rose 15.7 per cent year-over-year to $457.1 million. These results, which also exclude extraordinary charges and gains, were roughly in line with preliminary results filed by the company on May 4. That's when Mr. Lutz signalled that he would be working intensely to solve a variety of production-related problems. Mr. Lutz explained yesterday that an analysis of factory performance in the fourth quarter revealed the following pattern: By the end of the second month, fewer than 40 per cent of the products that would normally be built during the quarter had actually been manufactured. This meant that 60 per cent of the production would have to occur in April, and the plant simply couldn't manage it. Accordingly, Newbridge has already ordered changes to the master production schedule to distribute the load more equitably during the quarter. Mr. Lutz said this involves putting in place a "nominal" production plan that is continually fine-tuned as the actual orders come in. "The real trick is to manage those variations on a weekly basis," Mr. Lutz said. "Only history will record if we do that well." Newbridge is also consolidating its inventories and order-entry jobs at a single location to minimize potential communications difficulties across multiple databases. The company has also implemented salary incentives that will encourage sales people to land orders before the final week of the quarter. One example: sales employees will get no credit for an order finalized in the 13th week. If Newbridge actually delivers a $1.02 U.S.-per-share result, this would result in a 73-per-cent gain over fiscal 1999's final results, which were published yesterday. Mr. Lutz added that he was "comfortable" with predictions that Newbridge sales would top $2.2 billion in fiscal 2000. Excluding one-time hits and gains, Newbridge posted a $161.8-million net profit (91 cents per share) in fiscal 1999 compared with $171.3 million (98 cents) the year before. Revenues jumped 10.5 per cent to a record $1.79 billion. Fourth-quarter earnings were $32.5 million (18 cents), up slightly from $31.9 million (18 cents) during the same period a year earlier. Sales rose 15.7 per cent year-over-year to $457.1 million. These results, which also exclude extraordinary charges and gains, were roughly in line with preliminary results filed by the company on May 4. That's when Mr. Lutz signalled that he would be working intensely to solve a variety of production-related problems. Mr. Lutz explained yesterday that an analysis of factory performance in the fourth quarter revealed the following pattern: By the end of the second month, fewer than 40 per cent of the products that would normally be built during the quarter had actually been manufactured. This meant that 60 per cent of the production would have to occur in April, and the plant simply couldn't manage it. Accordingly, Newbridge has already ordered changes to the master production schedule to distribute the load more equitably during the quarter. Mr. Lutz said this involves putting in place a "nominal" production plan that is continually fine-tuned as the actual orders come in. "The real trick is to manage those variations on a weekly basis," Mr. Lutz said. "Only history will record if we do that well." Newbridge is also consolidating its inventories and order-entry jobs at a single location to minimize potential communications difficulties across multiple databases. The company has also implemented salary incentives that will encourage sales people to land orders before the final week of the quarter. One example: sales employees will get no credit for an order finalized in the 13th week. Mr. Lutz indicated that his firm intends to acquire new software tools to assist in the analysis of inventories. He said one significant difficulty that emerged in the most recent quarter was linked to this breed of software: material was assigned to incoming orders on the basis of order dates and not on whether it would contribute to maximizing revenue for the company. "There was no optimization routine," Mr. Lutz said. Newbridge officials said they were confident that most of the production bottlenecks would be solved before the end of June. Longer-term, the company still plans to re-design some of its products to make them simpler to manufacture. Newbridge will also cut the number of options available on key products following a consultation with its marketing group. This, too, should expedite production. Mr. Lutz added that Newbridge will consider outsourcing more of its production to specialists, but only after he's sure he has his own act together. He pointed out that outsourcers make their major money by handling design changes and product variations -- implying that outsourcing more of Newbridge's production now would be a relatively expensive proposition. He will simplify his product lineup first. Newbridge also revealed yesterday that it took a fourth-quarter restructuring charge of $74 million, aimed at closing certain operations, including sales offices in Japan and Russia, which will now be served by indirect sales channels. As well, the company has discontinued some mature product lines. Mr. Lutz said the restructuring will produce an annual saving of $40 million in fiscal 2000. When one-time gains and charges are included, Newbridge recorded a net fourth-quarter loss of $29.8 million (17 cents) compared with a $3.6 million profit (two cents) during the same period a year earlier.