Aviat Networks Inc (AVNW) 2003 Q3 法說會逐字稿

Good day, and welcome to the Stratex Network's Incorporated third quarter fiscal 2003 financial results conference call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Miss Laura Grave, Director of Investor Relations. Please go ahead, ma'am.

Thank you, everyone, for joining Stratex Networks today to discuss financial results for the third quarter 2003. Carl Thomsen, chief financial officer and Chuck Kissner, CEO, will results for the most recent quarter and our current business outlook followed by a Q&A session. During this conference call, we may make forward-looking statements regarding our business and the wireless industry, in general, including statements related to our market share, improvements in operating efficiencies, future revenues, margins and net income per share, further facilities consolidation, profitability, anticipated decrease in fourth fiscal quarter operating expenses including SG&A, anticipated increases in R&D, operating efficiencies, balance sheet improvements, DSOs and inventory turns, performance in the Middle East and Africa region, results of manufacturing outsourcing, order pipeline and new product pipeline, efforts to reduce expenses and quarterly output.

It is important to note that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those results stated in such forward-looking statements. These risks include the risk of increased competition, continuation or further tightening of global capital markets for telecommunications and mobile cellular projects and economic and instability in the Middle East and other markets in which we compete or in which our products are manufactured.

For a further discussion of these risks, as well as risks relating to our business in general, we refer you to the disclosure under the heading "factors that may affect future financial results" in our quarterly report on form 10-Q for the fiscal quarter ended September 30th, 2002 filed with the Securities and Exchange Commission on November 14th, 2002, as well as disclosures contained in our other SEC filings. With that, I will turn the call over to Carl Thomsen, chief financial officer.

Thank you, Laura, and welcome to those listening to our fourth quarter conference call. As a quick summary, we're very pleased with the top line results and the continued improvement in the bottom line due to the restructuring and outsourcing programs implemented over the past year. The balance sheet improvements over the past several quarters have been outstanding, reflecting the improvements in operational efficiency. We ended the quarter with over $90 million in cash, DSOs of 59 days and inventory turns at 7.4.

The market continues to be challenging and while long-range visibility isn't clear, we believe we are increasing market share as our revenues are up from the same period last year. As we indicated in the last quarterly conference call, we took further cost reductions in the past quarter and incurred a charge primarily related to further consolidation of our facilities and our San Jose, California, operations, as well as a re-evaluation of the exposure in other facilities due to the current and projected real estate market situation.

The summary of the financial results - on the order side, new orders for the third quarter were $50 million and back log was 86 million, at December 31st. By geographic area, North America was 3.7 million. South America, 4.1 million, Europe, Middle East, and Africa was 29.5 million, Asia Pacific, 12.8 million for a total of 50.1 million. By product line, our mid-capacity product, primarily xp-4 (ph) were 21.5 million. The high capacity lkm (ph) product line was 13.5 million, and the DXR family was 8.1 million. Services were 7 million for total, again, of 50.1 million. Overall, the other activity was in line with our expectations and bookings were up 7 percent from last quarter. We're pleased with the continued strength in the orders of the Middle East and Africa region, as well as the solid ltm (ph) and DXR order bookings.

For revenue, that was 43.9 million in fiscal Q3. A 9 percent increase from third quarter of last fiscal year and was down slightly from the 56.2 million reported last quarter. Revenues have not been relatively stable for the past five quarters, and the current status of the Telecom markets, we believe that's quite a positive result. To give you by geographic area, North America was 3.7. South America was 4.1. Europe, Middle East, and Africa is 26. Asia Pacific's 15.5 for 49.3 million in revenues and by product line, again, the mid-capacity or primarily XP4 product line is 18.2 million. High capacity ltm (ph) product family's 13.6. DXR, the long haul products are 10 million and services were 7.5 million in the quarter.

The gross margins were 28.1 percent in the third quarter compared to 24.2 percent last quarter. Overall margins were favorably impacted by lower manufacturing expenses as well as the favorable product and customer mix. Most of the manufacturing reductions planned early this year have now been implemented and quarterly spending in this area has been reduced substantially from last fiscal year. The outsourcing of San Jose, California manufacturing has progressed extremely well throughout this major transition, we've continued to meet customer delivery requirements. In fact, in the last quarter, our shipment area was the best it's been in a number of years with about one-third of the revenue for the quarter recorded each month.

Product mix and cost reductions resulted in improved gross margins in the third quarter and should result in additional increases in the margin percent in the fourth quarter. However, some of the pricing or proposals currently being bid are lower prices due to competitive pressure, which will slow down or reverse this trend, this margin trend for a few quarters until our next project generation unity begins to have an appreciable impact, likely in fiscal year 2005.

Operating expenses - the R&D expenses at 3.4 million were compared to 3.5 million last quarter, 4.1 million last year. A reduction from last year's really reflecting the closure of the Seattle facility. Engineering expenses is expected to increase somewhat in absolute dollars over the next several quarters as we focus on development and commercial release of the new unit Unity product platform. I should mention that Unity is the engineering product name and the product name is yet to be announced. Selling general administrative expenses were 12.4 million fiscal Q3 compared to 13.2 in the prior quarter and 13.7 last fiscal year. Decreases in both selling and administrative expenses reflects the impact of the facilities consolidation and ongoing spending reductions. I expect SG&A will decline in absolute dollars further in Q4.

The loss from operations excluding special charges related to asset write-downs, facility consolidation and employee reductions was 1.9 million, which is about half of the 3.9 million operating loss reported in the second quarter and a substantial improvement from the 7.7 million loss reported in the first quarter. These improved operating results are despite lower revenues in the third quarter as compared to the second quarter and about at the same level of revenues as in the first quarter. Interest and other was a net expense of $600,000 in fiscal Q3 compared to $400,000 in fiscal Q2. Increase in expense was primarily related to foreign currency costs and some letter of credit costs.

We did require some special charges in the third quarter. As I noted in the last quarter's conference call in the continuing pursuit of efficiency, we reassessed our facilities and fixed asset requirements based in part on the results of the manufacturing outsourcing program. This program and other actions have been more beneficial than our original estimates and we will now be able to further consolidate our facilities in San Jose beyond what we planned and reserved previously.

This decision resulted in a special charge of 13.2 million in the third quarter. This charge is primarily related to the lease commitments on a vacated space plus writing off certain fixed assets in our San Jose location. These actions except for some minor relocation and facilities redesign caused no cash impact. We also reevaluated the reserves previously established for other vacated facilities based on current market conditions and specific offers we received to sublease some of this vacated space. Based on this analysis, we increased the reserves previously provided for those facilities.

On the tax side, we did provide $400,000 in the third quarter for income taxes compared to $100,000 in the last quarter. We expect to continue to provide for foreign taxes for the balance of fiscal 2003 in the range of 200 to $400,000 per quarter. Net loss for the quarter was 16.2 million, or 20 cents a share. Excluding the charges related to the facilities consolidation and asset write-downs and employee reductions, which totaled 13.2 million, a net loss for the quarter was $13.2 million, the net loss for the quarter was $3 million or 4 cents a share, compared to 4.4 million in Q2 and 8.7 million in Q1.

On the balance sheet side, cash increased during the quarter to 90.2 million, at the end of December compared to 83.2 million at the end of September. Receivable collections exceeded our expectation and inventory continued to decline during the quarter, which resulted in these higher cash balances. This is despite a significant reduction of over $9 million in our current (ph) liabilities. Accounts receivables decreased 14.5 million to 31.8 million, and as I said, DSOs improved from 79 days in the second quarter to 59 days in the third quarter.

In Q3 of last year, our DSOs were 112 days, so we had almost a 50 percent improvement in DSOs over the past 12 months. Shipment linearity, customer mix, and excellent receivable collection efforts all contributed to the dramatic improvement in the receivable status. I believe with our significant international business, going forward, DSOs will be in the range of 60 to 70 days. Inventories also decreased, the amount was 3.2 million, or another 15 percent during the quarter. Overall, inventories have decreased 56 percent since the end of Q3 last year and inventory turns improved to 7.4 compared to 4.4 at the end of last fiscal year.

I will again give a note of thanks to the manufacturing operations personnel in San Jose, California and Wellington, New Zealand for the excellent job they have done in this area. These dedicated employees have focused on meeting customer commitments while at the same time controlling inventory levels and have succeeded on both counts. With the outsourcing of the manufacturing operation and supply chain processes which have been implemented over the past six months a majority of improvements in inventory turns are reflected in the Q3 results. Stratex Networks continues to operate with zero long term or short term debt. However, to provide additional flexibility announced today that we established a $22.5 million working capital credit line with Silicon Valley Bank. I will mention we have no immediate plans to utilize this facility.

Looking forward, into the fourth quarter, although new orders in Q3 were $50 million, based on current customer required delivery schedules, we expect the slight decline in revenue in Q4 in the range of 45 to $48 million. While this is slightly below Q3 revenues, our view is that basically over the past several quarters, revenue has stabilized and have averaged around $50 million. Margin should improve in the fourth quarter. Operating expenses are expected to continue to decline in the fourth quarter due to the facilities consolidations and reduction in other expenses which were actioned (ph) during the third quarter. As a result of better margins, lower operating expenses, I expect net income per share to be in the range of a loss of three cents to break even on lower revenues.

I don't claim to have a crystal ball, so forecasting beyond the current quarter's not really realistic at this point. Our break-even point is continuing to decline with the ongoing expense reductions and operating improvements we have implemented. Our plans, as we go on to the next fiscal year, is to focus on winning market share, completing the rollout of the ltm-mx (ph) product and focusing on the completion of the new Unity platform, which will be introduced later in the calendar year. Of course, we will continue our focus on world-class asset management to maintain and improve our balance sheet position. Balance sheet metrics should stay about the same, as I mentioned DSOs 60 to 70 days and inventory turns above seven.

We made many dramatic changes in the company in the last 18 months, as detailed in prior conference calls. The market environment is still uncertain, as many customers evaluate their capital spending needs and available funds in calendar 2003. In addition, while we certainly hope that the political conflicts in the Middle East will be resolved peacefully, the unstable situation in that region could impact shipments at some point in the next year as a significant portion of our business is currently in that area. I would now like to turn the call over to Chuck Kissner, our Chairman and CEO, for an operational summary and comments on the company's plans going forward.

Thanks, Carl. I would like to put a little bit of flavor on the results and then provide our investors with some information about what we're seeing in the markets. From operations' point of view, we decided, as you know, at the beginning of our past fiscal year, to change how we do business to face this new reality, and the results have been exceptionally clear when you look at the operating metrics. The quarterly spending over the past 24 months is down about 50 percent, and there's been parameters that are showing that we're running more smoothly. Large-scale operational improvements show up at the top-level measurements, such as the ones that Carl talked about, linearity being nearly perfect. Inventory turns are up 240 percent, and despite that, our book-to-ship cycles our responsiveness to customers, our book-to-ship cycles are down 17 percent. DSOs are down over 40 percent.

So we're confident that we can now scale profitability on a lower asset and cost base than at any point ever in our history. Our current estimate of quarterly capacity is about 70 to 75 million in sales, and that's on about the same operational cost base. That's obviously the culmination of a top-to-bottom improvement in manufacturing, development, supply chain and a number of other processes, as well as a implementation and tightening up of our information systems, but mostly, it's the dedication to make changes during tough times that the theme of employees here have demonstrated worldwide. We're not ready to say yet that the market is proved, obviously, but we believe that the streamline performance is going to meet a wide range of outcomes in the market. So as Carl indicated, we're continuing to reduce costs, the impact of these additional reductions, many of which are accomplished, should be seen in our results in Q4 and beyond.

Let me talk a little bit about the market. The market for our products is very similar, obviously, to other wireless infrastructure segments in that the declination - the rapid declination that occurred over the past 18 to 24 months appears to have subsided at least for now. Competition is fierce, but we believe we're being effective in most areas. Strength does continue in eastern Europe, Africa, the Middle East, and to some extent in Asia. Asia order rate was down a bit this quarter, but it was about the same level as the quarter before last, mostly due to lumpiness.

Weaker areas continue to be Latin America and western Europe. Orders are up in North America for the third quarter in a row, but the numbers are still pretty modest, and as we penetrated more accounts in North America, which we have successfully done, it's also becoming clear that our strong product portfolio for world markets needs some changes to fully address this market, and we're going to address this. Pricing competition is strongest in Asia and in western Europe. However, our product and the process cost reductions are so far exceeding the decline in prices and that's why you're seeing higher gross margins from us. At this point, our main competition in global markets is NEC (ph), Ericsson, Alcatel and Siemens, generally in that order, and in North America, our competition is generally Harris and Alcatel.

Let me talk a little bit about products. During the last quarter, we introduced the newest product in our line which is the Velox LE (ph) which is a licensed exempt digital radio for the 2.4 and 5.7 gigahertz bands. These are unlicensed radio bands. This radio is good for hot spot deployments in existing networks. It gives customers configuration flexibility they didn't have before. Product is available for sale this quarter. It's currently being bid into three networks.

Again, as we said before, we don't expect the sales of Velox LE (ph) to be large on their own, but they're helpful in bringing customers on board with us with wireless transmission at a very easy entry point. Sales of the new LTMMX (ph) continue to be positive. We did make an announcement during the quarter, if you noticed, an upgrade with Jordan Mobile Telephone Service. Jordan is a user of the ltm (ph) product and they're upgrading the capacity of their network and using the order ltm (ph) radio in other places. The LTMMX (ph) roll-out across all bands should be complete in three to four months.

Carl also referred to, and we discussed generally before the work on a new product platform, which we have referred to previously as the Unity program. This program now is drawing the majority of our development expenditures and the platform is designed to dramatically reduce the number of components that a customer will need to outfit a typical network for high-speed, wireless transmission. Applications for this product platform include mobile wireless, fixed wireless, private networks and networks that are a mix of those. In our next earnings release scheduled in April, we hope to discuss more fully what Unity is and what applications specifically it will support. Progress, to date, and the early customer feedback continue to confirm that the Unity project has good potential to be another industry breakthrough for Stratex. With introduction late this calendar year and volume shipments next calendar year, we're hoping that Unity will produce the majority of product sales for the company sometime in the next fiscal year.

I will make a little comment about outlook here and then we can turn the call over for questions. The industry forecasts that we've had access to for this calendar year still indicate an uncertain or lethargic business, mainly because of the financial condition of the service provider business overall. We, obviously, hope for a better environment, but I want to assure investors that we continue to assume the worst, but we also prepare to capitalize on any improved market outcomes. For example, we expect further financial improvement in Q4 as Carl mentioned, even without any top-line improvement.

Those of you who have been following us know that we have been totally committed to rebuilding the financial strength of this company, as a fundamental part of our long-term strategy. Going forward, we'll continue that discipline, but market initiatives and the new product developments that I mentioned will assume an increasingly important role in the company's future. We intend to aggressively use our financial performance, our operational efficiency, and these new product introductions to continue gaining share in this market.

I wanted to tell you a quick story because we obviously always can talk about what's positive looking inward, but we had a chance for somebody to evaluate us, you know, last quarter. We had a major customer audit, and it was actually one of the most extensive that we've had in years and we had lots of them by a customer who knows us quite well, and the results confirm that we will hoped.

The audit went well, but more importantly, they noted that we had made vast improvements across the company in many, many areas and we have demonstrated that we had the dedication and the capability to achieve our future vision. It may be hard to see this in the context of current markets and we know there are lots of challenges ahead, but nevertheless, to be a player in the future, we think we're creating the right kind of company for our shareholders. With that, we will turn the call over to questions.

Thank you Mr. Kissner. If you do have question or comment that you'd like to make, you may signal us by pressing the star key followed by the digit one on your touch-tone phone. Again, that's star one if you have a question or a comment. We'll take your questions in the order that you signal us and take as many questions as time permits. In addition, if you are on a speakerphone and have your mute button depressed, you will want to release this function before you try to signal us, it will block the signal from reaching our system. So, we'll pause for just one moment to assemble our roster.

Our first question is from Earl Lum (ph) with CIBC World Markets.

Good after Chuck, Carl. A couple of quick questions, if you look at the pricing environment right now, are you seeing aggressive pricing across both the sdh and pdh product lines, or is it primarily focused on pdh and is it more global or a regional issue that you see right now?

Yeah, I'd say it's more pdh than it is sdh. It's more western Europe and Asia. The price pressure we've seen other than that, and there is pressure everywhere is about what we have thought, but I'd say it's been a bit stronger with pdh and western Europe and Asia than we had seen. When you start looking at total situation and start blending all the pluses and minuses together, it's probably about the range that we thought it was going to be, though, overall.

Okay, so on a quarter-over-quarter basis, would it have been within the range that you were expecting, or was it a little bit more aggressive than you had thought?

I'd say right now, it's been about where we said it was going to be. I think Carl commented that looking out several quarters, if you just look at the kind of trends that are out there, we expect to see increasing price pressure over the next three or four quarters.

For the North American market, since you have been seeing some strength, can you kind of help us understand exactly what the current environment looks like? Are the mobile carriers, at this point, continuing to look towards a replacement for their lease lines, and do you expect that this trend could continue throughout calendar 2003?

It does look that way to us. It looks like they're getting more serious about doing that. You know, certainly, we've seen more requests for it, and if we look at the results of our people who are well positioned in that market, like Harris and Alcatel, their numbers seem to demonstrate. Obviously, we don't have privy to the details of their numbers, but all of the data seems to point to that direction.

A couple of more. For the Velox (ph) product you're bidding right now, is that going to have a higher than normal margin currently to the pdh and sdh products that you have, or is it in line with your current margins?

Pretty much in line.

Okay, and then finally, given that you had an above one book to bill at this point in time, and it was up a decent amount from last quarter, would it be a correct statement that things are starting to at least stabilize from your perspective and we're not going to continue to see the declines that we've seen over the past couple of years?

No, I think we said all along that orders are kind of lumpy, and the conclusion that we've come to, just in looking at the market data that's been published, including by your firm, I guess, is that there's lumpiness, but over time, our revenue has been relatively flat over the last four quarters or so, so we're building some share as a result of that, but the market, itself, we don't see as improving yet.

Okay, and one quick final question. In terms of global rfq (ph) bids coming up from some of the larger carriers, can you kind of describe where that situation is right now? Where you expect to be as you move forward into the year?

I am trying to understand your questioning. You mean the number of them?

We see more global rfqs (ph) coming from the carriers versus more of a traditional regional rfq (ph) coming out, for like the Vodaphones and so forth. Or kind of, where is the trend going in terms of procurement in terms of the carriers?

Well, I think there's some carrier consolidation, so that changes the profile somewhat. But you're probably referring to Orange is in the process of doing a global rfq (ph), or at least it's close to global. It isn't 100 percent inclusive, and I think that has been moving along at a reasonable pace. I expect that will come to closure here soon, but you never can tell. We haven't really seen - we actually expected to see more global rfqs (ph) by now, and although there are some carriers talking about it, I just haven't seen it kick into motion yet.

Great. Thanks a lot, Chuck.

Moving on, we'll hear from Matt Robinson with Ferris Baker Watts.

Good afternoon. I have two questions. Can you start off with - can you talk about turns, business as percentage of your bookings? Have there been any trends or any changes you've seen? How would we regard turns as a percentage of your sales in the quarter? Hello?

Yeah. We're just looking at the numbers because we want to give you an accurate answer here. We actually haven't looked at that for a while because it's been relatively stable, but it's probably about 30 percent of our business, 30 to 40 percent every quarter, and I haven't seen any change probably in the last four quarters.

Okay.

Remember, we changed the model of the company so we would handle turns business better, and so we've kind of ramped up our turns business, I'd say probably, 18, 24 months ago and specifically went after that. That's one of the reasons we've been able to gain some share, so we really haven't seen much of a change in it.

And I guess that's part of what you said earlier in terms of your cycle times.

Right.

What's changed to signal the pricing pressure in the medium turn? Is there a competitor that's come out with a new product line? What gives you something you have a profound sense there that something's a little different than it has been?

Well, one fundamental fact is that, although the market shares have been shifting around quite a bit, nobody's gone away yet. So that creates some behavior that usually results in pricing pressure, so that's number one.

So that, you know, kind of like death throws (ph) or something like that?

Yes. It means there's still too much capacity, I think.

Okay.

I wouldn't go so far as to call it death throws because that would be too qualitative and judgmental.

Just trying to keep it lively.

Yeah, I understand. And there's been one competitor, one global competitor who seems to be using price. We always seem to have one in every downturn, and so one has emerged, and before you ask, we're not going to identify who it is, but at least partly because it's just our observation, and I could be incorrect. But certainly one has been quite aggressive about certain accounts around the world and going after them with price, and so that tends to cause the industry to react.

So when you say it's a little further out, that means they're forward pricing at some future point. Because if they aggressive price, it would be nearer term.

I think it's going after longer term contracts and the value of that contract. You could say it's forward pricing, certainly, because a supplier might expect to be bringing their costs down over that period, either through efficiency or through product replacement.

All right. Now, there's been in other segments of the infrastructure industry, there seems to have been some resurgent activity in China. And one company that's kind of appear - although a distant one who has been particularly active with one obtaining orders, what do you see about China? It doesn't sound like you're seeing a lot of participation there? How do we explain that?

I think in terms of mobile - in terms of wireless infrastructure or transmission of infrastructure for these mobile networks, that's a lagging indicator. So if there are large infrastructure deals being cut and networks beginning to roll out over the next 6 to 9 months, if that's really true, then the presumption is that we should see a nice spike up in demand. There is - in our specific case, we still have some inventory being worked down in China for some of this back haul, so that affects the short-term results. In fact, I had a comment that I originally had in the notes, and I will say it now because I didn't have it in there. We do expect the China business to begin to improve over the next few quarters for us because, clearly, inventory is getting worked down, so our apparent numbers are not as great as what's really getting demand out of China.

So the sell-through is still happening?

Sell-through is happening, but it's not happening at the rate that we saw a couple years ago, that's for sure. I think part of it is that there are alternatives to transmission being used where a lot of the infrastructure built out is already has microwave and other facilities in place more than they did two or three years ago, so that has an impact on the demand, but in general, I'd say the timing between announcement and realization, announcement of an infrastructure build and the realization of a microwave back haul tends to be longer than most places for some reason. But I do expect that that will be a very - certainly by next year, I think that's going to be a pretty big business for us again.

Can you now build everything at your outsourcing partners?

Yeah. Yeah, the transfer is complete. There are still some parts and some specialized things that are not built by those partners. You know, there are different places, and we still have some pilot production, but essentially the amount we intended to transfer is done now.

A quick one for Carl. Your obligations related to your - your property that you've consolidated, driving around the Valley, there's - the only people that look like they're making money are the ones putting up vacancy signs for realtors, it looks like. So what - what do you have in the way of obligations now, and how do you see it consuming cash over the next few quarters?

Well, the obligations are spread out over the next eight years. We have subleased some facilities, actually. We've adjusted the reserves this quarter based on the current market conditions and assumed, you know, the waves and actually being able to sublease that space and at some point, lower rates than we had to pay, but the cash consumption is spread out over quite a long period of time.

And that was multiple years before, but is it up to the point where you can measure it in millions or hundreds of thousands based on your further consolidation.

Per year, it's a couple million a year.

Okay. Thanks a lot. Sounds like you're making progress.

Thanks.

Todd Allen with Kenny Securities has our next question.

Hi, gentlemen. Congratulations on a good quarter.

Thanks.

I have several questions. First of all, I don't know if the guidance was provided specifically on gross margins, but as you're completely outsourcing and gross margins continue to increase, do you have a feel as to where that might be in this March quarter and beyond that?

I always said about the gross margins that we thought they would increase a bit in this coming quarter, in the March quarter, based on part of the outsourcing and in part on customer mix and product mix that we see them delivering in the fourth quarter, and I did expect to see some improvement this coming quarter.

Are we talking 100 basis points, or do you have a feel yet?

We didn't give any specifics on that.

Okay. I think in your last guidance you said you had a pretty good visibility or full pipe that might be in the low 50s upwards to 54, 55 million in top line in March and you indicated in the call that you think the changes in terms of delivery schedule you had customers. Is that coming from all regions? Is there a particular group of customers that are slowing you down a bit?

I would say it's a little more generic than any one specific customer. There's a couple customers that we thought were shipping - we'd be shipping to in the fourth quarter, and they pushed out their requirements until later in the year, so not one single customer, but it's, you know, we had a group of customers that we were counting on and some of those pushed things out.

Let me maybe phrase that a little differently, so if sufficiency is in the 5 or 10 million of where we thought it would be is that something you make up in the June quarter? Is it that quick of a turnaround? Do you see sequential increases going forward?

We really don't have a crystal ball looking out that far. I don't see any. At this point, you know, we don't see any big market turn coming up, so we would, you know, if anything, we'd say we are expecting about the same as the June quarter, but that's about as far as we'd go at this point.

Okay. Well, I wasn't really asking about market turns, just catching up with your existing back log.

Well, we're trying to hedge, obviously, because we don't know which way the market's really going to turn.

I don't know if this was addressed. We talked about it in the past and it seems like the most recent number I recall is 85 cents, 85 percent rather. Is mobile infrastructure specifically - can you give us a breakout of how much of this quarter's sales and maybe words, how much was mobile infrastructure versus broadband, microwave, long haul, what have you.

That will take a minute to do.

This is just a rough estimate. We would say right now, 65 percent mobile, 20 percent fixed wireless access and 15 percent private network.

Of those categories is any particular one outperforming?

What does outperforming mean?

Well, growing faster than the rest of the basket? Like fixed wireless took it on the chin.

No, that's about what we've been running. Yeah, we've been running about that. I'd say percentage-wise, probably private network has been coming up faster.

OK, and then these will be real quick. The bank line, they have 90 million in cash and cash appears to be turning in the right direction. The purpose of this bank line, would you anticipate using that for an acquisition. Is it just for additional strength and cushion? What's your intention?

It's not for acquisition. It's for capital needs and build banking relationships, as well. You can set up lines where you can't need it as much and we would rather build those relationships now and keep them over a long period of time.

Okay, and this is quick as well, one final question. We spoke about this in the past, what do you think that your global market share is within, say, the addressable piece of the larger microwave transmission market.

Server addressable market, about 15 percent.

That's all I have. Thanks very much.

And we'll take our next question from Colin McArdle with Bear Stearns.

Good afternoon. Most of my questions have been answered, but I wonder fundamental you could talk about any customer concentration issues? Customers that count for more than five or 10 percent of total revenue.

Yeah, you know, typically, we have one or two customers that are in the 10 percent range of total revenue. That changes from quarter to quarter. That was again true this quarter and one customer was just over 10 percent, and then, you know, a cup were in the 5 to 10 percent range, but it's always true there's that kind of mix, but it rarely does the same customer be that top one depending on what the build out schedule is.

Right. Okay. Clearly, some of the progress on the balance sheet is due to the linearity of sales throughout the quarter. What's driving that and is there any possibility of that reversing?

Well, mostly what's driving it is the process improvement. It's - meaning that the information systems that are connected to our sales force all the way through to our supply chain management are pretty tightly coupled now, so we plan the quarter pretty diligently to make sure the production is linear throughout the quarter. The orders tend to be linear, as well, because we also manage that in a different way so that linearity is really mostly process improvement. There's definitely a chance it can get worse because it can't get any better than it was, and I don't expect in the future because of how we're running the company for that to significantly change. I think we'll stay within some reasonable range of linearity.

Sure, understandable. Very, very good progress given the fact that so much of it is international. Do you see North America growing as a percentage of total? What would be the driver of that? And is there any specific number you'd put on it for next year?

We see North America growing as a percentage of the total. We're not projecting anything for next year in terms of what that would be. The reason it's growing is the number of accounts that we have accumulated over the past year or so has grown and we expect we're laying the seeds right now for future business.

OK, thank you.

Before we take our next question, I would like to remind our audience, it's star one if you would like to ask a question. The next question comes from Debra Viacoff (ph) with HD Brows.

Good afternoon, it's Debra Viacoff (ph) and I'm with Brows (ph). You commented in our opening remarks and there have been several questions regarding competition, price competition. I wonder fundamental you would maybe go a step further and give us an idea where you think your priorities should be, you know, trying to meet that competitive - that competition and preserve your market share, or are you more concerned about maintaining your margins, and then a second question would be in regard to Unity platform. You mentioned that you planned to bring it out in the next few months. Could you give us a better idea if it's two or four or six months and then also, how would you believe that this is going to compete with some of these other companies that you mentioned, NEC (ph) or Ericsson or Alcatel?

OK, I'd say what we have in place now to further improve the costs in the company that have not been shown on the results to date, but we expect to show. Right now, I think maintaining share is of somewhat higher priority than margins, because I think we have enough in motion right now to be competitive and still improve our financial performance. And part of that is because in a down market, we have to make sure that we retain customer relationships for, one, when the market turns, or two, when we introduce a new product family. We need to have places to send the new product. So share is definitely the --share is definitely an important aspect.

With regard to Unity, we said it would be released late this calendar year. Obviously, release can be defined as different things. Customers will have the product long before then, but in terms of it becoming, showing up as revenue in the company's results, I wouldn't expect that to happen before the end of the calendar year. As far as the competitive positioning, because of the design of the platform and its lower cost to the customer, it also has a lower cost to us, so we expect it to produce, as we always do in each new product generation a uptick in our gross margin performance. Because of the type of capability it offers, which we will talk about more in April, we expect to be extremely competitive in the industry because it's a bit of a different approach to providing high-speed wireless transmission.

Thank you.

We'll take our last question from Tim Long with Credit Suisse first Boston.

This is Jason Batter (ph) calling in for Tim Long.

What was the name?

It's Jason Batter (ph). I just wanted to ask after the restructuring what your break even would be and kind of your outlook for free cash flow given the improvements after this quarter here? Thank you.

We would, on the break-even side, we were saying it was in the $55 million range. We'd lower that to the low $50 million range or 50 million plus or minus a bit, depending, of course, on the customer mix, but we've definitely lowered the break even from the 55 to 60 million that we're talking about a couple quarters ago. We are expecting that it will be, you know, cash neutral this coming quarter. Again, I mean, we'll be cash neutral this coming quarter. It could be plus or minus, but basically cash neutral.

Okay. Great. Thank you.

And as I said, that was our last question. Mr. Thomsen, I will turn the conference back to you for any closing remarks.

OK, this is Chuck. Ladies and gentlemen, I just want to thank you for your continued interest in the company and in this difficult investing environment. I believe we're making good progress for our investors, and we're looking forward to the next call with you. Thank you very much.

And that does conclude today's conference. We thank everyone for their participation. We hope you have a great day.