First off a very good summary from SIhttp://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=14653612Secondly I'd strongly suggest you listen to the callNorth America: 1-800-633-8284 International: Toll number (416) 626-4100Passcode: 14826514#Playback is available 24 hours a day until 11:59 p.m. EST Nov. 6. A busy signal means all playback ports are in use, call later.Thirdly this is what I took from the call:1) In the 9 months of 2000 NT had approximately the same earnings and revenue as in the whole of 1999. Since Q4 is typically 30% of annual revenue it seems likely that NT will have 2000 full-year growth some 40% above 1999. NT expects that it will grow 30-35% in 20012) Carriers' Capital expenditure (CapEx) is increasing and NT is taking an ever larger portion of it. Initially NT thought 2000 CapEx would be 15% this is now put at 20+% and 2001 shows no decrease in growth rate (i.e. 20-25% for 2001). So no carriers are NOT slowing down expenditure3) Inventory. This is the reason why everyone panicked. In the recent past NT has been unable to guarantee short (8 week or less) leadtimes on critical optical products. Since carriers have detailed roll-out schedules, they were hoarding what they had and over-ordering to ensure that they had enough inventory for their roll-out plans.This problem has now been removed because NT has practically NO INVENTORY ISSUES. As a result carriers no longer felt the need to over-order and in fact were able to reduce their inventory (which they had in fact paid for and then warehoused). It was a surprise to NT that this happened so fast, but it is a sign of the faith carriers have in NT's capacity.The faith is partly due to NT's component business. Because NT owns its component business it is very sure of supply and can thus be more confident about future manufacturing capacity than other people.3a) The related problem is in finding enough warm bodies to install all this kit. Nortel has increased its installation workforce some 30% and now expects to make significant productivity increases (i.e. all the new bods have to learn how to install things before they can go out and do it efficiently) whihc should remove some of this bottleneck. However significant customers do their own installs and they too are having problems getting trained technicians.4) Optical revenue is in a tornado - somewhere around 125% YoY growth rates - with Nortel taking significant market share from competitors. Nortel's Metro NGN growth is at an annual run-rate of $2billion - or 20% of NT's optical portfolio. Given that Metro has only really started rolling this year thats a heck of a good start.5) Enterprise business picked up. Clarify must have done stonkingly well though it wasn't explicitly mentioned. My product the Passport 8000 has doen so well that we now have some minor leadtime issues (i.e not the <2 weeks we wanted). Given that we fixed the same problem in Optical I anticipate that this is not a major deal.6) Vendor Financing. Nortel has $1.2 billion in actual loans (same as end of 1999) and $3.1 billion in committed financing. Of the commitments 85% is to 15 large well funded entitities each with in excess of $100million in loans. The remaining 15% is made up of relatively trivial loans to about 30 customers. $3.6Billion is about 10% of 2000 earningsNortel is very very conservative when it comes to booking revenue from these kinds of deals. Nortel puts equipment to such customers on its books at the value of the salvage rights (i.e. used resale) and only books additional revenue when it gets the cash. I.e. Nortel has practically no downside risk from such companies not paying and considerable upside when they do.7) Nortel is kicking butt in IP telephony. The Succession portfolio and its method of migrating TDM voice switches towards new IP based ones is in fact increasing sales of Nortel's DMS TDM CO switches which is unexpected8) Order backlog. At the start of 2000 order backlog was $11billion or so. Despite all the inventory/leadtime fixing stuff noted above NT currently has about a $15billion backlog. This is greater than our Q4 estimated reveue. In other words even if we make no new sales in 2000 and we do our projected growth of Q4 we will still have a $5billion or so of backlog carried over to 2001. As John Roth said in his closing comments we can sell everything we make.By the way - a subnote on the enterprise business - I did some rough sums on market share of NT L3 switches vs Extreme/Foundry. I think (note this is based on fairly crude numbers) that NT's L3 switches (PP8600 and PP1200) will have sold more in Q3 than either of the other 2. I.e. both of them reported revenues of $100-120million for the last quarted. We seem to have beaten that handily. I await the Dell'Oro official numbers to verify.DD
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