| Westell: We Will Be A Software Company – And Profitable |
| Thursday, 30 July 2009 00:13 |
 Rick Gilbert has produced a $1.5M profit after a string of losses, based on several $million of additional orders from Verizon or AT&T for home gateways. Rick says “we are becoming more of a software company as features are added to those core products.” The shift makes sense, after a decade of struggle against high-volume Asian hardware suppliers. The Bells loved to parade then-CEO Van Cullens around D.C. because Westell actually manufactured in Illinois. They now contract manufacturing in China. The biggest issue is one customer (?Verizon) that is holding back $13M “until we would deliver substantially all of the software that is potentially called for in the arrangement selling that product.”
Westell was a DSL pioneer over a decade ago and supplied some of the gear for the earliest trials. Rick Gilbert's Copper Mountain and especially Alcatel won away the DSLAM contacts, but Westell remained the favored supplier of modems to Verizon and BellSouth. Having ex-Bell Atlantic CTO John Seazholtz on the board always helped. Margins fell as DSL modems became commoditized and especially after Shaygan Kheradpir took over Verizon purchasing and ferociously squeezed supplier margins. Their strong relations with Bill Smith at BellSouth have proven out as they have retained AT&T as a customer. Westell's strategy became to find more customers around the world, but Gilbert has now pulled back. “The big difference between some of the previous initiatives and this year is, we are focusing on our current customers, our large customers, our fundamental product lines.” Good to see them coming back; the stock not long fell to twenty cents and sold for less than the company's cash. With no debt and $50M in cash, the $80M market cap would make them highly attractive to acquire in ordinary times. Brian Cooper has taken over as CFO recently. (Transcript: Seeking Alpha) |