Occam Networks: The Future Looks Great

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Comments

[Mr. Bert:]

With respect to the need for customer wins, the answer is not necessarily.

Upgrading customer lines is usually a long term process that takes many many years. Even if a small customer upgrades all its lines at one time, you will see a big revenue pop. For example, if you look at the company's latest presentation from the Jefferies conference, you will see the company highlights New Hope Telephone Coop which replaced "all" of its copper POTS and DSL lines to fiber. New Hope has only 6,000 lines so I asked management why they would highlight such a small customer. The response was enlightening in that this customer accounted for a very big amount of revenue. I believe it was in the range of several million dollars.

for further evidence, if you look back at the 10Ks, you will see that in 2004, Palmetto was their largest customer, accounting for $3mm in revenue, even though they had only 14,000 lines. Why? Because they did all 14,000 lines at once.

So even a small carrier can have a big impact on revenues depending on what they do.

Here is a good report for you:

www.nationalaglawcente...

Thanks to Andrew Schmitt for pointing out that it costs about $2,000 to connect one subscriber. That's a pretty hefty price tag.

Feb 25 09:46 AM

[Mr. Bert:]

Of course, I expect Occam to get lots of new customers as well.

With respect to ZHNE, I don't know it as well, but my sense is they have some issues and are not doing so well. I think their MALC platform doesn't compare to the BLC6000 and is more of a legacy platform.

If you pull up the ZHNE 10K, and do a search for "RUS" or other such derivatives, you will find no mention of the RUS. Their products are RUS certified, but my sense is that it is not a meaningful portion of their business. If you look at their balance sheet as well, if they were doing a meaningful RUS business, their should be some sort of deferred revenue account.

Bottom line, they should be a beneficiary on some level, but they are not your play.

Feb 25 09:51 AM

[ffllyer1:]

Are they just a "box" seller or is there any recuring revenue from mainteance contracts - there has to be some software in there.

Feb 25 02:08 PM

[Andrew Schmitt:]

Note the RUS money must be spent by Sept '09, not '10. The provisions of the bill indicate all money must be allocated by Sept '09 unless specifically said otherwise and while there is a clause in the 4.5M Dept of Commerce section there is no such clause in the Dept. of Agriculture RUS plan.

Feb 26 10:52 AM