Aviat Networks Inc (AVNW) 2004 Q1 法說會逐字稿

Good afternoon. My name is Christy (ph) and I will be your conference facilitator.

At this time, I would like to welcome everyone to the Stratex Networks first quarter fiscal year 2004 conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number two on your telephone keypad.

I would now like to turn the call over to Ms. Laura Graves, Director of Investor Relations. Thank you. You may begin your conference.

Thank you, operator. And thank you, everyone, for joining Stratex Networks today to discuss financial results for the first quarter of fiscal year 2004.

Carl Thomsen, Chief Financial Officer, and Chuck Kissner, Chairman and CEO, will review the 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; cost management and improvement in operating efficiencies; future revenues, margins and net income or loss; anticipated decrease in operating expenses; balance sheet improvement; DSOs and inventory turns; manufacturing outsourcing, backlog, near-term stabilization and growth in demand in our industry; claims alleging preference payments; new products and their anticipated introduction, performance, market acceptance -- excuse me -- and impact on our total future results; orders pipeline; expected shipment and revenue recognition of delayed orders; revenue stabilization or growth; efforts to reduce expenses; profitability and value growth; and future results of operations.

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 political instability in the Middle East and other markets in which we compete, or in which or products are manufactured.

For a further discussion of these risks, as well as risks related to our business in general, we refer you to the disclosure under the heading, "Factors That May Affect Future Financial Results" in our annual report on Form 10-K for the fiscal year ended March 31st, 2003, as filed with the SEC on May 19th, 2003, as well as disclosures contained in our other SEC filings.

During this afternoon's call, we will refer to both GAAP and non-GAAP financial measures of our operating and financial results. For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures, and a quantitative reconciliation of those figures, please refer to today's press release regarding our quarterly results and certain non-GAAP financial information available on the investors' press release page on our website at www.stratexnet.com. The press release has also been furnished to the SEC as part of the form 8-K.

We will make this information and a web-cast replay of this presentation available on the investor page for a 12-month period.

In addition, please note that the date of this call is July 23rd, 2003, and any forward-looking statements that we may make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of future events.

This conference call is the property of Stratex Networks, Inc., and any recording, reproduction or re-broadcast of this conference call without the express written permission of Stratex Networks is strictly prohibited.

I'd now like to turn the call over to Carl Thomsen, our Chief Financial Officer, for his financial commentary. Carl?

Thank you, Laura, and welcome to those listening to our first quarter fiscal year 2004 conference call.

In summary, revenue for the quarter at $36 million was in the middle of the revised range of 35 to seven million that we forecast in our July 2nd preliminary release on the quarterly results. This was about five million dollars lower than our initial guidance for the quarter due to one large shipment that we expected to be completed during the quarter, which was delayed due to completion of paperwork, including processing of LCs that were necessary for us to ship and recognize revenue.

The reported loss per share is four cents in Q1 of fiscal '04. However, excluding the one-time benefit of $3.5 million from the legal settlement, the pro forma loss per share is eight cents. This adjusted pro forma earnings per share is in line with the guidance provided in the recent July 2nd announcement.

I would note that while revenue declined 25 percent from Q1 of last fiscal year, excluding the restructuring charges of $14.2 million recorded in Q1 of last year, and excluding the $3.5 million benefit recorded in Q1 of this fiscal year, financial results from ongoing operations actually improved year-on-year. This reflects the positive impact of the substantial restructuring and cost reductions the company implemented over the past 12 months.

Backlog at the end of the first quarter was $41 million.

Now, let me review some of the specific financial results for the quarter. On the order side by geographic area, orders for North America were $3.2 million, and South America was $7.5. The Europe, Middle East and Africa sector was $21.3 million, and Asia/Pacific was $9.8 million, for a total of $41.8 million.

By product family, the XP4 mid-capacity products were $10.3 million of orders. The Altium high-capacity was $11.7 million, and the DXR family was $10.9 million, services -- $9.0 million and services were $10.8 million, for a total of $41.8.

Overall order activity and bookings were slightly up and in line with our expectations. Asia and the Americas orders improved sequentially; though the Middle East and Africa sector was lower than the prior quarter, due, in part, to the political unrest in this region.

We are pleased with the continued good order results in the Altium and DXR lines. Combined orders for these product lines were about the same as Q1 of last fiscal year. The XP4 product line, in particular, was impacted by declining prices and stiff competition, resulting in an orders decline from $21.8 million in Q1 last year to $9.5 million in Q1 of this fiscal year.

Revenue of $36.0 million in fiscal Q1, as mentioned, is in line with our revised expectations. However, this was below the original guidance at the beginning of the quarter of 40 to $42 million.

As I said in the last conference call, I quoted, "it's difficult to provide a forecast." And that proved to be a true statement. We believe it is beneficial to provide our investors and analysts who follow us, follow the company, with information as to the current outlook for our business. However, over the past 12 to 18 months, as more of our business has become book and ship -- meaning, we ship product in the same quarter that we receive the order -- it's become more difficult to forecast specific future results. The overall tightening of capital spending and intense competition in the industries served has compounded this problem.

Due to the significance of several key shipments during any quarter, revenue can be impacted due to a variety of circumstances that may change during the quarter. This was certainly the case during the first quarter; one large shipment was postponed.

Incidentally, with regard to that shipment, as we do not want to discuss specific customer situations for competitive reasons, I will simply state that most of these paperwork issues have now been resolved and we expect to complete this shipment this month.

Revenue by product line for the quarter, narrow-band (ph) , our XP4 and DART product line was $12.5 million; Altium, $9.9 million; DXR, $6.2 million; and services were $7.4, for the total of $36 million.

By geographic area, North America was $1.6 million; South America, $4.2; Europe, Middle East and Africa is $21.8 million; and Asia/Pacific was $8.4 million.

Gross margins declined to 20.4 percent in Q1 of fiscal '04, compared to 21.4 percent in the first quarter of last fiscal year, and 29 percent in the prior quarter. Margin decline is due to a variety of factors, including lower capacity utilization, price competition, geographic and customer mix. Margins would have been about 24 percent had the delayed shipment been recognized, so that represented a significant impact, as well.

As noted on the last conference call, we expected to see margin erosion during the current fiscal year. However, for Q1, the impact was larger than anticipated due to the factors just discussed.

On the expense side, R&D expenses were $3.9 million in Q1, compared to $3.6 million in Q1 of last fiscal year, and four million in the prior quarter.

As I indicated in last quarter's conference call, we expected engineering expenses to remain about the same, or increase slightly as we focus on introduction of the new Eclipse product line. Although, total operating expenses have been reduced in the past 12 months, we actually increased R&D spending in this challenging financial climate due to our confidence of the impact that the new Eclipse product line will have on our total company results in the future.

Selling, general and administrative expenses were $10.5 million in Q1 of fiscal year 2004, compared to $14.6 million in the same quarter last year, and $11.2 million in the prior quarter. This is about a 30-percent decrease in selling and in admin expenses compared to 12 months ago and reflects the impact of San Jose, California facilities consolidation, lower third-party agent commissions, as well as company-wide spending reductions.

During the quarter, we recorded a $3.5 million benefit due the favorable settlement of a legal claim that we had previously reserved. Due to the nature of this settlement, I'll not be able to discuss specifics of the settlement during this call.

Other income and expense was a net other income of $100,000 in Q1, compared to $500,000 other income in the prior quarter, and compared to $100,000 expense in Q1 of last fiscal year. This change from the prior year and the prior quarter is primarily due to the impact of foreign currency contract costs and foreign currency exposures.

Tax rate -- we recorded income tax benefit of $100,000 in Q1 of the current fiscal year due to tax losses in one foreign subsidiary that we were able to benefit for financial reporting purposes. Due to the number of foreign subsidiaries the company has around the world, we will likely show tax expense for future quarters in the fiscal year. That loss for the first quarter was $3.4 million, or four cents a share, excluding the one-time $3.5 million benefit for the legal settlement that I previously discussed. Net loss for the quarter on a pro forma basis was $6.9 million, or eight cents a share.

On the balance sheet, cash declined $5.3 million to $84.8 million during the first quarter due to the losses that were reported.

Total accounts receivable decreased $5.4 million in Q1 to $25.6 million. DSOs were essentially unchanged at 64 days in Q1, compared to the exceptional 60 days in Q4, and are a dramatic improvement from the 87 days that we reported in Q1 of last fiscal year. As I indicated in our last conference call, we expect DSOs to be in the 60 to 70-day range this year.

Inventory increased $1.2 million during the quarter to $21.5 million. This was due to the delay in revenue recognition on the one shipment that was previously discussed. Inventory turns were 5.4 compared to 6.9 at the end of Q4. Had that one shipment not been delayed, inventory turns actually would have been about the same as the prior quarter.

Total liabilities declined about $8.4 million, and, of course, Stratex continues to operate with zero long-term or short-term debt.

As for the forecast going forward, forecasting results has not gotten any easier. In fact, due to the high percentage of book and ship revenue, forecasting continues to become more difficult. While the proposal or order pipeline remains good, predicting when orders will actually be booked is an ongoing challenge. And, as was evident from the Q1 results, one or two shipments can have a significant impact on reported results. However, at this point we believe revenue for the second quarter of fiscal year 2004 will be in the range of 37 to $45 million based on Q1 order levels, back log and expected new orders.

We do not see an improvement in the overall worldwide market situation, and as stated last quarter we're forecasting a 10 to 15 percent decline in the markets that we serve in fiscal year 2004. Operating expenses are expected to decline modestly in the second quarter. Our major focus is on completion of the new Eclipse product line.

Those shareholders who were able to attend the annual meeting on July 15, were able to view a demonstration of this new product family and the benefits from this single platform networking approach. We expect we will report a loss for the current quarter, second quarter of fiscal year 2004 of 4 to 8 cents a share. Forecasting beyond the current quarter is not realistic in today's market environment.

Our primary objective is, at this point, is successful introduction of Eclipse and, of course, we will continue our focus on asset management to maintain our balance sheet position including DSO's in the range of 60 to 70 days and inventory turns of six to seven. I would now like to turn the call over to Chuck Kissner for an operational summary and comments on the company's plans going forward.

Thanks Carl. I'll make a few comments and then we'll open to any questions. Carl gave you a pretty good overview of the results for the quarter and the near term outlook. This is pretty consistent with what we indicated to look for from last quarter.

The market conditions and the competitive environment are still giving us a round of challenges here. And the slip of one large shipment, obviously, impacted the results significantly. But even if that shipment had been able to be recorded, the overall results would have been less than the prior quarter but about what we had said that the environment would reflect.

But one plus is that the new orders for 200 (ph) showed the increase in customer activity that we talked about last quarter, and it could start to result in some stabilization and hopefully some growth and demand in the near term. Again, against this the competitive situation is likely to continue to pressure on gross margins until the next new product cycle begins to build momentum.

I guess you know we're not alone in this difficulty in the market. Many companies in our market are feeling similar pain. We've listened to some of the calls recently. Motorola, their sales are down 10 percent. They're seeing margin pressure. Erickson said they were expected flat to declining sales in a market that was declining in the mobile area by 10 percent or more. And Nokia said they didn't see any sign of an improving infrastructure market in 2003 and they expect the market will contract by 15 percent or more this year.

I guess our observation is the industry is making some headway here in terms of restructuring, getting supply chain management straitened out for these new volumes, doing process improvements and reducing the run rate on costs. But many companies are still remaining settled with the burden of the long-term financial commitments and future headcount reductions to come.

I guess to contrast, those of you who faithfully follow Stratex, over the past eight quarters or so, know that we've worked pretty diligently to work through most of these structural changes already. And what we're really focused on now is moving beyond these kinds of initiatives by entering a new product cycle.

Now, we are going to continue to aggressively manage costs to protect the short-term results, but we are completely committed to changing our business model. In a large part, by rolling out the new Eclipse platform and ramping it up on schedule. So, although it's not posted in the financial results, it's a little hard to see our progress on Eclipse was actually quite encouraging in Q1.

And this is both from a product development as well as a customer development perspective. And that's the focus of what I want to touch on today before we move into the questions. We did set out about a year and a half ago to develop what was hopefully going to be a compelling new proposition for our customers that not only would serve them better when compared to the existing alternatives, but could return Stratex to sustainable profitability and growth and value.

We said this before. We'll repeat it again. Eclipse is very significant because it will eventually replace most of our existing multiple lines of microwave radios. It's designed to cover transmission speeds from about four megahertz per second up to 311. And it will be available in all commonly used radio frequencies worldwide. Now due to the significantly lower planned manufacturing costs, Stratex's financials should benefit greatly from Eclipse. But the benefits for our customers are quite significant.

We've really now designed several networks for perspective clients and in the course of doing that we've been able to evaluate how well our design goals have held up against a real world kind of a network. And I just want to share some of that with you today. Some of these goals included, first of all, reduction in the customers cost to acquire all this transmission capability and this has been successful because they have to buy fewer pieces of equipment to accomplish the same task.

Secondly, there's been dramatic improvements or it looks like there will be dramatic improvements in total life cycle cost and we're looking at numbers well over 50 percent reduction in life cycle cost for the customer. Looks like we will be at about an 80 percent reduction in parts count, compared with the combination of our existing radio alternatives. Looks like we'll hit our goal of tripling the expected reliability in field operations and the last goal is to give the customer and us a great deal more flexibility through software control as their networks migrate and grow and appears we're going to be successful there.

We'll be moving to field trials here shortly and we're confidant will be met and that this will turn out to be a compelling proposition. I'll touch on those trials here in a moment. There are a significant number of new innovations that are incorporated in Eclipse. We have applied for a number of patents to protect these innovations.

There are six specific technology innovations which deal with both cost and flexibility of this design and which we expect to be successful in getting patents for. Just to touch on manufacturing here, our manufacturing partners are now in the process of gearing up to produce Eclipse. Eclipse was designed from the outside to be produced in an outsource model. Our existing manufacturing agreements that we launched on last year, did take into account the anticipated production requirements for Eclipse.

In addition to that, the design of Eclipse does allow for more distributed manufacturing model around the world. The manufacturing hardware is now more standardized and has a lower parts count. The actual configuration control of these parts are now more in our customers hands through the licensing of software which will be available in a new software distribution system to be introduced with Eclipse.

We have had recently a number of customer visits to our headquarters here in San Jose, California, and we've had several visits to customer sites to show them Eclipse.

Those of you who attended the shareholder's meeting, as Carl mentioned, a couple of weeks ago, also got to see this new approach to building these high-speed wireless transmission systems. The reception so far has been very encouraging. It's been at least as good as we'd hoped and it is very clear now based on the customer reaction that Eclipse does offer this compelling and a refreshing change in how operators will be deploying microwave transmission.

One other point about Eclipse is it does expand our served available market, because it allows us to address market segments in which we do not participate at all or don't participate fully in today. So you probably want to know where are we in the introduction. Well, the system is working now.

Trials of the Eclipse are expected to commit soon. The first is scheduled in about four weeks starting in Latin America. The second is in Europe with additional trials expected over the next few months. We continue to project commercial revenue by our fiscal Q4 and our confidence is growing quickly on this.

Just to summarize what the comments of both Carl and I and then we'll have questions. Volume may stabilize or increase on the current products, but the competitive situation is likely to put pressure on gross margins until the new product cycle begins to build some momentum. Because of that, we will continue to aggressively manage our costs to protect the short-term results.

But I want to be very clear with our loyal investors. WE are completely committed to rolling out this new Eclipse platform and ramping it up aggressively and on schedule. Customer interest is building and based on their reaction to our product previews that we gave this summer, we feel confident that the new product will be well received.

This market is tough, but just as we revamped the company's cost structure last year. We believe this year we'll begin to see the fruits of one of those dramatic product cycles and one of the most dramatic in our history. At this point, I'll open it up to questions.

Thank you. At this time I would like to remind everyone if you would like to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q & A roster.

Your first question comes from the line of Kevin DeDe (ph) with Merriman and Company.

Hi guys.

Hi.

Hey Kevin (ph) .

Could you just sort of highlight that progress you're making with that large customer you talked about working more with in Europe?

Talked about on previous calls?

Yes.

Yes. We've been - this is the down select from 12 to 15 down to three. Is that the one you're talking about?

Yes. Thanks.

Yes. We have been notified that we were a winner in that thing, one of the three winners. We and two major infrastructure suppliers. So shipments have resumed to the various clients, the various customers included in that group, and we're out now working on picking up some business from the folks who had been deselected.

So, that worked out well. They have not elected to do a public announcement of this at this point. That may be coming.

Understand. Do you see your progress there perhaps offsetting some of the gross margin pressure you've discussed?

I'd say more it's offsetting other weaknesses in the market, geographical weaknesses. So, I can't really say that the margin pressure will be offset. In other words, I think we'll see more business as a result of that. And I think, you know, starting to see it now. Our Europe business is starting to pick up.

Right. OK. Just your point on quoting Motorola, Erickson, and Nokia.

Yes?

Harris reported an eight percent sequential increase in their microwave business this afternoon.

Great.

So maybe that will work out in your favor down the road.

Yes.

Can you, Chuck, just sort of talk about how you see the Eclipse changing your business model? Given that you'll be offering software as a download to your customers you're going to need a larger service quotient to satisfy that demand. And given your restructuring efforts over the post, oh, 18 months, how do you expect to meet those requirements?

Well, first the initial difference is going to be in the gross margins on hardware, because to provide the same capability requires a lot more manufacturing costs. So we'll see that initially. The software component we'll build over time as that installed base begins to grow and those products are then upgraded in the network for either speed or functionality.

We'll start to see the software. I think it's important to understand that in the last year and a half or so we've significantly, even those we've made a lot of cuts in the company, we've significantly boosted our capability to be a service provider. And that shows up in the service revenues that we have in the company.

That's actually been climbing significantly as a percentage of the company's total revenue. In addition to that, we are - we have built a system for delivery of the software, electronically. And so in terms of the kinds of human resources that are required, we don't believe that's going to be significant.

Third thing is that in the last year and a half, we also significantly upgraded the information systems within the company to do control and configuration. So we know where all of the things are at any point in time. What's in the install base for the customer. So our ability to be able to track the installed base has significantly improved and that - that's in our goal, obviously, to be able to track the software releases and how those go out the door.

I think we're feeling pretty confident that we're going to be able to deliver that. Because of the higher software content over time, I have to admit probably a year ago when we were identifying the key issues in rolling out this is significantly different platform. That was something that personally made me very nervous, but recently I think we've had pretty good evidence that we've got this well in hand.

OK. Last question from me. Can you just sort of highlight by the four geographic regions that you break out, where you're seeing the most pricing pressure and who you're toughest competitors are? And do you just mind taking a little time to walk through each region looking at those?

Yes. I think it's becoming fairly broad, but the biggest - I think the largest pressures would be in Asia. And we see it other places around the world, but I think the most competition we have, actually, is out of Asia in so far as - I think that's the best way to characterize it.

So, it would follow then that where an Asian supplier is particularly strong, we'd have the most price pressure.

Understand. When you talk about revamping your distribution in China, are you seeing the benefits of that yet? Or when do you think we'll see those?

I think that's coming soon. I think that distribution is, Dennis (ph) , all distribution has been established now and we've had to get some new approvals in place for our products and so on. But those, for the most part, are done now so there is bidding going on to these alternative channels so I expect we'll start to see some results from that in the next quarter or two.

Great. Well, thanks so much.

OK.

Your next question comes from the line of Earl Lum of CIBC World Markets.

Good afternoon gentlemen.

Hi.

Carl, if we look at the guidance for the second quarter, it looks like are we expecting margins to stay roughly flat then given the EPS guidance and the revenue range?

Yes. I mean, you come to that conclusion, may up a little bit from this quarter but ...

Then with Chuck saying that services is now becoming a bigger portion and certainly above one book to bill in that segment, how are the margins there relative to the actual products? Would they favorably impact you guys as that segment continues to grow?

Yes. We - in our 10Q we give information on service piece of the business and margins and service have improved pretty significantly over the last couple of years when we were basically a break even margin for service, and now it's in the 20 percent range. So, that's helped our margins improve over the last 18 months. At this point, it's about stabilized at that range.

So it's lower than the company average, but it's much better than it use to be.

OK. But you're not expecting that to be any type of a positive impact on a go forward basis? In terms of being above ...

Not in the near term, in the long term as the software content grows, yes.

OK. But that's when we really get into full volume product of Eclipse into fiscal '05, correct?

Yes. We're not planning to sell the software before the hardware gets out there.

Right. Now, Chuck, certainly you're orders in North America doubled and almost doubled in Latin America. Can you talk about what's going on there? There's certainly a lot of activity given the order input that we've seen so far.

Latin America, especially Mexico, is starting to warm up a little bit but I would also say that Latin America was largely service oriented and in this particular case. So we're still in a lumpy condition in Latin America.

The North America, just represents what we've been saying for several quarters. That we've been building some momentum in North America because of the distribution network that we've been establishing a lot through value added resellers. And so it's beginning to build some momentum.

Incidentally, our newer product, our unlicensed product, we started getting some business in that area in Q1. It's still a fairly small number, but remember that only rolled out a couple of quarters ago and that's beginning to get some business. In fact, we heard we got another booking today on that.

So that's largely a North American phenomenon.

OK. And as that continues to grow, do you expect to report that out as a separate segment or will that just be lumped in?

I think when it becomes significant enough we may. We'll consider doing that because it is different from the other products.

Obviously with ASP certainly XP4 would see the most pricing pressure, but how do you see the market for Altium at this point in terms of pricing for the high-cap, high frequency products?

I think all of the products are under pressure. Just that I think we'd enjoy a better starting margin point with Altium.

And then is Eclipse, if we've looked at the products certainly when we looked at Altium and as that kind of revolutionized the high capacity market when you first introduced it, it looks like Eclipse is on the verge of doing the same thing again, but in a more different way because it spans all frequencies and all capacities in one unit.

That's correct.

At this point, it doesn't look like there's any comparable products out in the market today. Is that correct?

As far as we know, that's correct, yes.

Great. Thank you.

OK.

Also, just one quick question, I guess. With the book-to-bill above one, have the order patterns -- as you've exited last quarter and entered this quarter, have they stayed roughly the same? Or have they gone up or down? Or can you give us some sense of how things are continuing to move into the second quarter?

Are you talking about this quarter?

Yes.

Oh. I think it's too early to report results. But all I can say is the same as we said last quarter. Activity levels are definitely up, and that's sustaining themselves right -- that's being sustained right now in Q2.

OK. Great. Thank you, gentlemen.

OK.

At this time, I would like to remind everyone if you would like to ask a question, please press star, then the number one on your telephone keypad.

Your next question comes from the line of Mike Walkley with RBC Capital Markets.

Good afternoon. This is Neil Shawfrin (ph) for Mike Walkley.

I just had a quick question again about China, and I was wondering if you were still seeing weakness in China. And then, I kind of want to touch on the distribution strategy. I think you touched on it earlier, but if you can expound on the strategy and the results of changing from the single distributor to a multi-distributor model.

I think we're still -- I think we're still seeing relatively this (ph) in China compared to what we saw a couple of years ago. So, I think China definitely is weaker, at least in the microwave radio segment. There are some signs of interest picking up there.

With regard to the distribution strategy, I do -- what we're doing is segmenting the market there, and using several distributors or partners to attack different parts of the market where they specialize the best. And I think right now, we believe it's going to help us greatly, because we're seeing opportunities that we hadn't been able to see before when we were dealing through one channel.

OK. You don't see any disruption in revenue from China due to the change.

Well, we haven't had much revenue from China recently. So, I'd say I'd like to see some disruption.

OK. Thank you.

OK.

At this time, there are no further questions.

Ladies and gentlemen, we'll go ahead and we'll conclude the conference call at this point. Participation was strong out there. It's strong, but it's kind of quiet out there. I'm gonna turn it back to Chuck Kissner at this time for closing comments.

Well, this is obviously a critical time for the company, and, you know, has been for quite a while. I think our confidence, despite all of this, is growing quite a bit. So, for those of you who called in, we'd like to thank you for your interest and for our shareholders, for you your support for us. Our employees are all working very hard on your behalf. We'd like to wish you a great evening. Take care.

Thank you for your participation in today's Stratex Networks first quarter fiscal year 2004 conference call. You may all now disconnect.