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VTSS Investor Forum

Needham Presentation

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http://wsw.com/webcast/needham69/vtss/

Posted by phobos - 7 years ago

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just listened to the call. Thanks for posting it Phobos. My cut financially at least is that management just announced that revenue for 2015 will be flat to maybe a little up for the whole year. FY 2014 total product revenue was $102.7 million. Basing it on managements comments I would be at $113 million for FY 2015 (this is for product revenue and includes no IP revenue).

This based on the following comments. New product revenue ($49.5 million last year) will be up 50%-75% for the year - that means $75-$87.5 new product revenue for FY2015. I will use $80 million.

Legacy product revenue. By management comment this will be down 40% in the first half FY2015 and "down 10-20% from there." Last year first half legacy revenue was $29.5 million, down 40% equals 17.6 million expectation for the 1H 2015. Down 10% "from there" would be .9 times 17.6=15.8 million for the second half.

Legacy revenue then would be 17.6 for the first half plus 15.8 for the second half = 33.4 for FY 2015 (2014 was 53.2)

So you have $80 million new product plus $33.4million legacy = $113 million total product revenue (there is no IP revenue in this number) for the full year 2015.

Given the fact that in the past 8 years or so VTSS has never exceeded estimates I would think $113 represents the high side. In other words it is most likely the number will be lower. But we can always hope.

A couple of other things. Management commented on guidance for the December quarter. The restated the already stated guidance. I would be very surprised to see anything that diverged materially from that when the actually report.

At the next conference call if management follows past practices, they will give guidance for the second quarter (march). If they guide revenue to around $25-27 million for that quarter start throwing out the $113. total revenue for the year will be lower than that. So we will see soon.

Posted by dlog - 7 years ago | Updated 7 years ago

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I have a somewhat more optimistic revenue analysis dlog.
The response to the first question (at 29:20) makes it clear that the 40% drop in Q1/Q2 refers to $11.5M (in Q4 last year) of "older products". Product revenue last year was $49.5M for new products and $53.2M for non-new products (including the "older products"). Let's use $80M for new products this year and assume that the non-new products are flat except for the drop in the "older products". The drop in older products is $4.6M (11.5 x 0.4) in the first half and $0.7M (6.9 x 0.1) in the second half. So the non-new products will be $47.9 (53.3 - 4.6 - 0.7) this year and total product revenue will be $127.9 (80 + 47.9). Of course assuming that non-new products will be flat (excluding older products) is iffy, but 25% growth this year would be nice for a change.

Posted by thereinman - 7 years ago

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from Q3 2014,
"We continue to transition our revenue base from older legacy products to our new product portfolio. We talk about the vintages of our products
to give investors a view of that. Oldest products have been going through an end-of-life process that started in early 2012. In Q3 2014, EoL was just
1% of our product revenue at $300,000, down from $1.3 million in Q2.
Going forward, we may see some customers come back for some of our EoL product. But generally, we expect end-of-life EoL revenue to be small.
In Q1 2014, we guided our mature products would be flat through 2014 and then begin to decline. Since then, the business has been a little bit
softer than that due primarily to weak market conditions. In the last quarter, we highlighted that a decline in these products may started earlier
than we had originally expected at the beginning of the year.
In Q3, our mature product portfolio was $11.8 million, remaining flat from Q2. As we see it now, mature should drop a little more in Q4 and then
decline more materially starting in Q1. In particular, both our PMD products that sell in the optical module markets and our commodity low port
count Enterprise switches, will decline substantially starting in Q1.
We intentionally exited these areas and have not invested in these two product portfolios in nearly a decade. We now believe the overall impact
will happen faster than we estimated at the beginning of the year with a decline of about 30% to 40% of total mature revenue in the first half of
fiscal year 2015. We then expect the decline to slow materially to about 10% to 20% per year reflecting the portion of our mature products that
are designed in the systems that will ship for many more years."

from Dec 4 2014'
"In Q4, our mature product portfolio was $11.4 million, essentially flat. As we stated last quarter, the mature will decline more materially starting in
Q1. Two product areas, PMD products and commodity low-port count enterprise switches, will cause a decline of about 40% of the total mature
revenue by the end of the first half of FY15. We then expect the decline to slow to about 10% to 20% per year. This is consistent with the guidance
we gave last quarter."

Thereinman,I see and like your version of possibilities! but,

" As we see it now, mature should drop a little more in Q4 and then
decline more materially starting in Q1."
" and our commodity low port
count Enterprise switches, will decline substantially starting in Q1."
"will happen faster than we estimated at the beginning of the year with a decline of about 30% to 40% of total mature revenue in the first half of
fiscal year 2015."

"As we stated last quarter, the mature will decline more materially starting in
Q1."
22:39 into the presentation, Marty reiterated that this 40% slide is truly taking place in this first half of physical 2015.

Lets say "non new products" took the hit you feared for an extra 2 million in the first half, this still would take us past $125.9 for the year. I trust you include IP??

Interesting, interesting!

Posted by GARIF - 7 years ago

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Anyone know the meaning of this on the Storage slide of the presentation??

"At Yahoo, we're always looking for new ways to improve efficiency and Simplicity of our infrastructure... INDUSTRY HAS PROVEN TIME AND AGAIN THAT ETHERNET ALWAYS WINS"

Posted by GARIF - 7 years ago

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Just so we know what we are talking about. If VTSS hits $27 million in revenue in the December quarter and guides to $30 million for the march quarter. To get to $125 million in total revenue (or higher) the 3rd and 4th quarter have to be $34-$35 million each. Good for VTSS if they can do it. We haven't seen those levels in forever.

Posted by dlog - 7 years ago

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dlog: I concur with the $90M figure, working with the growth in new product and the decline in legacy, I got right around the same figure.

Three quick things:

1. There are some markets that vtss is in now, like automotive and storage, where they probably don't know how to estimate the future revenues (GARIF, I think you mentioned something about this). I would guess that they probably estimated conservatively (confirmed design wins only).

2. vtss is not only providing chips, but also software and design services to many of their customers. When will we stop considering them competing with other chip-makers, and start considering them competing with the equipment makers whose boxes they are designing? CRG called this a "win-tel" strategy to provide a barrier to market entry to competitors, but I think there could be other implications too.

3. I plotted a sigmoid curve (sometimes called a Boltzmann curve or an "s-curve"), and the only way I could make the data points fit was to either make the point of inflection a lot sooner (2017 vs. CRG's 2018 or 2019), or to make the size of vtss' market a lot larger, and I mean A LOT LARGER. Either way, it's a good thing!

I don't think I'm too worried about vtss making their numbers this year.

Posted by phobos - 7 years ago

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This speaks to my second point above:

http://www.lightreading.com/what-mef-third-network-initiative-means-for-sdn-and-nfv/v/d-id/713026

...very, very interesting.

Posted by phobos - 7 years ago

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Absolutely Phobos!
" The Vitesse switch engines are very often used by our processing/processor partners to excelerate the networking functions going in and out of the processor and get optimal line rate performance as these processing functions are being connected to each other and the customer."

It's no wonder Switch sales with their nice margins are booming.

Exciting times indeed!

Posted by GARIF - 7 years ago

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Thanks again Phobos,

Nuss continues to remind the world of the importance of INTELLISEC and friends, VeriT,,,

"The only potential issue, they believe, is the fact that, "73 percent of companies have yet to make concrete plans for the IIoT"."

And when they are ready Vitesse will be there with her Turnkey etc solutions to help them make it painlessly happen.

Looks like we're going to be well represented AT DistribuTECH 2015,

http://events.r20.constantcontact.com/register/event?llr=sja6z7eab&oeidk=a07eaesaxhyae1dd305

Posted by GARIF - 7 years ago

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