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A good sign IMO - insider buy
24 Jan 2003 FINOCCHIO ROBERT J JR Buy 20,000 9.9979-9.9979 $199,958
The best weapon against "fear" is "facts"!!
DickMN - I still have great hopes for ELON. The economy needs to turn a corner and head back up before I believe utilities and other service providers are willing to put out the money in this area. In the mean time they have lots of cash, books look fantastic and they had a really great 2002, especially given the rest of the market.
BUT
I think single digits in the next couple of weeks will provide a great opportunity to buy more, or in my case get back into ELON. See I tend to flip this stock so I can keep increasing my position. And if ELON lands a big contract as Brett seems to think, why then I would see an easy double.
Take care.
The best weapon against "fear" is "facts"!!
I wasn't around today - but I see she tanked some .85, of course the broader market sucked, so ELON was dragged down with it. See that is the problem, she hit a low of 9.85, market still fears a war and will continue to drift lower, so look to pick this one up in the single digits.
Have a great weekend folks.
The best weapon against "fear" is "facts"!!
DickMN - I'm going to take a stab at this and say you're from Minnesota and your name is Dick? How did I do?
I wasn't trying to be funny, but actually make a point. I agree with you. When trying to read or figure out ELON, that is what you have to do, read between the lines.
All in all though, I truly like them as a company, but knew they would drop today after the CC and PR. Actually, though they rebounded nicely later part of the day. I'm still going to wait before I re-enter.
I would read or re-read Brett's analysis:
http://www.investorshub.com/boards/read_msg.asp?message_id=701625
He still believes another util will come on board.
"The next catalyst for Echelon remains the signing of a new service provider customer with some semblance of a pipeline behind it. We feel this should happen in late February to early March and is really limited by finalization of
contracts and deployment schedule issues. The likelihood remains that 2003 will be the year when service provider momentum begins to build"
And that will be the key. If that happens the stock flies, otherwise good solid company, IMO, that should trade between 8 and 14 in the near term.
Thanks for the post - take care
The best weapon against "fear" is "facts"!!
10:07am EST 23-Jan-03 C.L. King & Associates (Joseph A. Gomes, Jr. 518-431-3)
Echelon Corp.(ELON-NASDAQ): Fourth Quarter on Target, 2003 Expectations Lowered
ECHELON CORPORATION (ELON** - NASDAQ)
Analyst: Joseph A. Gomes, Jr., CFA Rating - Accumulate
(518) 431-3504/jag@clking.com Target Price - $13.00
Estimate Changes Previous Revised
FY03 $0.60 $0.45
Target Price $15.00 $13.00
52-Week EPS FY (12/31) PE Shares
Price Range 01A 02A 03E 01 02 03 Div Yld Rating Out
$11.15 $22.44-$8.36 $0.15 $0.41 $0.45 NM 27.2 24.8 NM NM A 40.6MM
**Designates companies in which CL King & Associates currently maintains a
market.
Echelon is the world leader in networking everyday devices. The company offers
a comprehensive line of hardware and software products for automating
building, home, industrial, transportation and utility applications. Echelon's
products are based on its LonWorks networking technology, an open standard for
interoperable-networked control.
Q4-2002 Q4-2001 2002 2001
Revenue $30.6MM $32.1MM $122.8MM $76.6MM
Net Income 3.6MM 5.2MM 16.8MM 6.0MM
EPS $0.09 $0.13 $0.41 $0.15
Fourth Quarter on Target; Lowering 2003 Expectations
Echelon reported fourth quarter 2002 earnings of $3.6MM, or $0.09 per share,
exceeding our estimate of $3.3MM, or $0.08 per share. In the same period last
year, the company reported net income of $5.2MM, or $0.13 per share. Revenue
for the quarter was $30.6MM compared to $32.1MM in the fourth quarter of 2001.
We were looking for revenue of $30.6MM. The year-over-year decline in results
reflects the impact of the pull forward of ENEL revenue into the third quarter,
the weak worldwide economy affecting Echelon's core business and a higher
expense level. ENEL-related revenue was $20.3MM in the quarter compared to
$23.2MM in Q3 and our expectation of $19.4MM. "Core" revenue in the quarter
totaled $10.3MM, versus our estimate of $10.6MM, and continues to be negatively
impacted by a weak worldwide economy. Echelon's revenue for the full year grew
60.3% to $122.8MM; ENEL accounted for $81.5MM and the core business $41.3MM.
ENEL revenue for the year was up 163%, while core revenue declined 9.4%.
Full-year gross margin was 51.2% compared to 51.5% in 2001. Net income rose to
$16.8MM, or $0.41 per share, from $6.0MM, or $0.15 per share in 2001.
FY02Q4 gross margin was 50.3%, slightly above our 50.0% estimate and up from
47.5% in FY01Q4. As we have mentioned in the past, last year's gross margin was
negatively impact by the first large scale shipments of metering kits for the
ENEL contract. With ENEL revenue at a lower gross margin level than the core
business, the influx of its revenue negatively impacted gross margin in FY01Q4.
Selling, general and administrative expenses came in at $12.3MM, in-line with
our estimate. Interest income for the quarter was $0.8MM, and the tax rate was
7.7%.
The ENEL contract continues to move forward. At the end of December 5.7 million
meters had been installed, modestly above the previous expectation of 5.5
million and up from the 3.5 million meters installed at the end of September.
During the call management did not provide any updated indications as to when
another utility customer may emerge. Previously, Echelon CEO Ken Oshman stated
he was confident Echelon would ink another contract before the end of the first
quarter. Last night Mr. Oshman made a "New Year's resolution" not make any more
predictions in this regard. Mr. Oshman did state he was more confident than
ever in the long-term prospects for the Network Energy Services Systems, i.e.,
service provider, business. In spite of Mr. Oshman's confidence, we believe the
lack of clarity on new business will be seen as a negative by investors.
Echelon's core business continues to be impacted by difficult economic
conditions.
Echelon ended the year with a superb balance sheet. Year-end cash and
equivalents totaled $134.5MM ($3.39 per share) compared to $111.7MM at December
31, 2001. Days sales outstanding fell to 68 at quarter's end compared to 88
days at the end of September. DSOs in the core business fell to 51 from 53,
while DSOs in the ENEL business dropped to 77 from 103. The company had $156MM
of working capital, no debt and shareholder equity of $195.0MM ($4.91 per
share), up from $174.7MM in December 31, 2001. Net cash provided by operations
improved to a positive $38.7MM during 2002 from a negative $17.8MM in 2001.
Our previous operating estimates for 2003 are too high, as the ongoing worldwide
economic softness and a more conservative forecast of ENEL revenue will result
in lowered numbers. We now are projecting core revenue of $46MM, up 11%
year-over-year, and ENEL revenue of $80MM, flat with last year. Although the
ENEL revenue is flat, in part due to its ability per the terms of the contract
to receive lower pricing on the metering kits, gross margin on the project will
increase. The impact of the higher gross margin from ENEL sales will increase
overall gross margin for 2003 to 56%, up from 51% in 2002. We expect operating
expenses to increase to $54MM from $48.5MM in 2002. Net income is now projected
to be $18.6MM, or $0.45 per share. For the first quarter we project revenue of
$31.5MM, with ENEL accounting for roughly $21MM of the total. First quarter
net income is projected to be $0.07 per share. As usual, the ENEL forecast is
dependent upon meter manufacturer Finmek maintaining its good standing with
Echelon to continue to receive the parts necessary to construct the meters. We
also expect ENEL to begin transitioning during the second quarter to the PL 3120
Power Line Smart Transceiver from the current metering kits. Any transition
difficulties could impact the ENEL forecast.
Net net, we expect Echelon shares to sell-off today as investors digest Mr.
Oshman's statements and the further push out of expected results. Nonetheless,
we continue to believe in the long-term prospects of Echelon, both in its core
business and its ability to attract more ENEL-like customers. Given the rock
solid nature of the firm's balance sheet, we believe the company has the
resources to continue to plug along until we see additional ENEL-like customers.
We believe a sell off today would present investors with a long-term investing
horizon and an attractive entry point. We are maintaining our Accumulate
rating, but reducing our target price to $13 from $15.
Previous research update - 12/03/02
Disclosures
Rating Changes
Date Rating Closing Price
05/24/01 Accumulate 22.71
08/22/01 Strong Buy 16.75
09/24/02 Accumulate 9.24
Price Target Changes
Date Price Target Closing Price
05/24/01 30.00 22.71
10/23/01 24.00 14.90
09/24/02 15.00 9.24
01/23/03 13.00 11.15
The best weapon against "fear" is "facts"!!
Here are the comments made by Brett Miller and analyst for A.G. Edwards who also asked some questions at yesterday's conference call.
10:12am EST 23-Jan-03 A.G. Edwards & Sons, Inc. (Miller, Brett 314-955-2620)
ELON:E OUTLOOK IMPROVING, MANAGEMENT NO LONGER FORECASTING NEW CUSTOMERS.PART 1
A.G. Edwards & Sons, Inc.
Equity Research - Networking Equipment
January 22, 2003
Analyst: Brett Miller 314-955-2620
Associate: Gavin Duffy
WHILE OUTLOOK IMPROVING, MANAGEMENT NO LONGER FORECASTING NEW CUSTOMERS
-----------------------------------------------------------------------------
ECHELON CORPORATION (ELON 11.15 - NASDAQ)
BUY/SPECULATIVE
-----------------------------------------------------------------------------
Disclosure Information. Please refer to the final pages of this report for
important disclosure information.
Market Cap ($mil.): $457 Est. Long-Term EPS CAGR:
Dividend: $0.00 Book Value Per Share:
Yield: 0.0% Price Objective: 16
Fiscal Year Ends Dec
EPS 2002A 2003E Prior 2004E Prior 2005E Prior
Qtr1 $0.07 $0.08
Qtr2 $12.00 $0.09
Qtr3 $0.13 $0.11
Qtr4 $0.09 $0.12
Year $41.00 $0.40
P/E 27.9X
-----------------------------------------------------------------------------
Summary:
- Solid fourth quarter execution. Revenues $30.581 and GM at 50.3%, inline
with expectations. Solid execution on operating expenses generated EPS of
$0.09 versus our $0.08 est.
- Company no longer giving any predictions for new service provider
contracts. Says more optimistic than ever. No investor should expect company
to be able to predict disruptive market shift.
- Momentum in its core device networking market remains economically
challenging and came in at expected levels. Conversations with Johnson Controls
and others indicate early signs of stronger retro fit market.
- Operating execution was world class with DSO's down 20 days sequentially,
accounts receivable down $9 million, cash up $30 million, operating profit of
$3 million.
- Enel's Contatore Elettronico program remains intact and came in above
previously expected levels as orders expected to ship in October were taken in
September.
- Company to provide materially higher functionality in two-way metering
solutions for follow-on customers.
- S&M lower seq., while G&A increased. Indicates high activity levels of
senior management. Addition of internal legal council both indicate high level
contractual issues are moving into overdrive.
- New integrated PL-3120 microcontroller/transceiver to be used in Enel
project beginning in Q2. Enel already qualifying it.
- Quarter above expectations on the bottom line with Enel program forging
ahead but offset by continued weakness in core business markets. Must sign new
material customers as Enel revenues are showing age down 6% year over year.
Crunch time is now in order to have new revenues beginning in 2004. Q1 going
from $0.10 to $0.08. Very little change to full year 2003 estimates, $126
million revenue and $0.40 EPS. Higher gross margins offset by higher than
anticipated operating expenses.
Conclusion:
We remain positive about Echelon's progress in both the device and service
provider markets, especially given the slow pace of service providers and the
global economic conditions. We may see more volatility to revenues primarily
from Enel and the changing demand tides between North America, Europe and Asia
Pacific. Core revenues will likely remain flat going forward until we see a
broader based recovery in the control end markets. We are looking for gross
margins to continue moderate improvements throughout next year with operating
expenses up only slightly to generate a full year estimate of $0.40, flat with
2002. This of course does not take into account any potential economic
recovery nor any new service provider customers.
The shares were weak yesterday due to the cautionary statements made in their
press release the evening of January 21st. The company waited a day to host
its conference call due to a death of a member of managements family. ELON put
cautionary language in its press release about the ongoing collection issues
with one of Enel's contract manufacture partners, Finmek, where there is little
collection default risk just slow payment and always the possibility of
Echelon not shipping to them accordingly. Secondly the upcoming technology
transition within the Enel meter project to a standardized part called the
PL-3120 could cause a production hiccup. Both of these are standard statements
the company has been making for over a year now in all their filings and on
conference calls.
The only material implications is that there could be a minor push out of Enel
revenues coming in the first and second quarter into the next corresponding
quarter yet that risk is always present with a large customer project.
Lastly and to a greater degree, there may some investors who had hoped for a
new service provider customer to be announced in the press release last night
and are therefore disappointed. The company was clear on its December 4th
call, though hedging, that it would most likely sign a new customer late in the
first quarter. Also the addition of internal legal council points credibly to
the level of contractual and equity structural dealings the company is now
engaged in.
We would use the share pullback as a buying opportunity for speculative
investors. The next two quarters is going to be crunch time for the company as
it must sign new material customers for revenues in 2004 or face continued
declining revenues as Enel plateaus.
The next catalyst for Echelon remains the signing of a new service provider
customer with some semblance of a pipeline behind it. We feel this should
happen in late February to early March and is really limited by finalization of
contracts and deployment schedule issues. The likelihood remains that 2003
will be the year when service provider momentum begins to build. The fact
remains that consumers want more cheap electricity while it is becoming
increasingly difficult politically to build new power generation facilities.
Trends in the commercial building, transportation and other controls markets
all look towards open standards networking and LonWorks leads in market share
by a wide margin.
Analysis:
On last night's conference call, management was upbeat about its own business
activities while becoming less cautious on the broader global economy saying
its core business prospects are indicating early positive signs. We still
expect Europe and Asia Pacific to be stronger for a couple of years however as
high population density in emerging markets is much more active in smart
buildings while Europe has been the global leader in green activities.
Operating expenses are expected to increase year over year by $5-$6 million due
to higher overhead cost including benefits, small selected salary increases,
and continued aggressive research and development spending along with marketing
increases.
Core Device Networking Business
Although the company's core networking business continues to be negatively
impacted by the ongoing worldwide economic slump, Echelon did make positive
strides on the new product front during the quarter. As previously announced
during Q3, the company added to its i.LON(TM) family of Internet connectivity
products with the introduction of the i.LON 10 and i.Lon 1000 adapters that are
both now shipping, which the company markets as a cost-effective way to
monitor and control small networks of everyday devices in homes, apartments,
and small buildings over the Internet. The i.LON adapter works in conjunction
with Echelon's LNS network management system to give remote facility managers,
homeowners and service providers access to everyday LonWorks devices. These
devices along with the addition of new integrated transceivers (Nueron chip and
power line or twisted pair transceiver in one chip) have seen high demand and
are opening new market opportunities.
Accordingly we are hearing about early signs of life in the retrofit building
controls arena, which is the real bread-and-butter of Echelons' core markets.
On the call last night president, Bea Yormark made the first positive market
comments in 2 years, stating several times that she was quite optimistic about
this core business.
Service provider market
Enel's Contatore Elettronico project appears to continue on track with revenues
coming in as expected on a dollar basis and 100 basis points higher in gross
margins. To date, Enel, has installed 5.7 million meters, above the 5.5 it had
forecast for year end.
Enel Pricing and Margins
The third generation of Enel meters, beginning in the second quarter, will for
the first time utilize a fully standardized product with the recently announced
PL-3120. This should allow worldwide power line volume to be concentrated on
a single product, driving cost out rapidly and thus materially increasing gross
margins. We point out that pricing to Enel is based on total volume levels to
date where cost of manufacturing for Echelon decreases with time due to normal
semiconductor design improvements. So the longer the program takes to deploy
the higher the gross margin dollars the program generates for the same revenue
dollars. The program is expected to go into early 2005 instead of ending in
the summer of 2004. We would anticipate Enel to begin trials of value added
services in the spring at the earliest as it is waiting until it has sold off
its final generating capacity triggering deregulation.
Enel Outlook
Enel continues to give Echelon two quarters worth of build schedules with the
full forecasted Q1 of $21.5 million fully booked. Of that amount, $3 million
is with Finmek, which must sign a letter of credit before Echelon will ship
them components. This thorn in the side is expected to continue as Finmek has
won a contract in a public tender with Enel thus Echelon will continue to
manage it with a steel hand. Management, with limited visibility into
quarterly revenues for 2003, speculated that they should mirror the current
year's levels at roughly $80 million with a higher mix going to metering kits
and fewer concentrators and software.
By incorporating the PL-3120 into the third generation meters associated gross
margins should increase rather dramatically through 2003 from the 48 percent in
Q4 2002 to the high 50 percent level by year end.
10:15am EST 23-Jan-03 A.G. Edwards & Sons, Inc. (Miller, Brett 314-955-2620)
ELON: OUTLOOK IMPROVING, MANAGEMENT NO LONGER FORECASTING NEW CUSTOMERS. PART 2
New Service Provider Customers and What They Will Likely Mean
The biggest news out of the conference call was CEO Ken Oshman's New Years
resolution, likely based on the company's newly hired legal council, to no
longer give service provider contract predictions. This will be widely seen
negatively, yet it should come as no surprise that a company the size of
Echelon, still in the early stages of market penetration cannot predict that
long established electric utility companies will completely scrap their entire
metering infrastructure and replace it during these weak economic times. We
continue to believe new customer contracts will likely be in the $20 to $50
million range with revenue recognition likely not beginning until at least the
second half of 2003, depending on the nature of the project and the timing of
the contract. The 5 or so customers Echelon is working with have between 1 and
5 million customers and will likely not enjoy the same economies of scale as
Enel due to size alone. In fact, Echelon last night gave credence to our
belief that Enel did much of its own R&D on its project and that subsequent
customers would purchase more fully integrated solutions. To quantify Ken
Oshman stated that it would likely be 5 times higher contribution to Echelon
than the roughly $11 per meter Enel is currently paying. That said, the
potential could be for higher overall combined revenues than Enel currently
represents, coupled with a smoother learning curve due to the experience
Echelon has gained from working with Enel. We feel these service provider
deals are where a meaningful amount of the BeAtHome software development group
is focused and the major market for the i.Lon 10 product.
New Product
The next generation of meters in the Enel project will utilize the newly
announced PL-3120 Power Line Smart Transceiver with integrated network
processor core and transceiver in a micro package. With production volumes
available in April, the announcement of Enel using this new product will
rapidly drive pricing lower. As we found out last night Enel already has been
sampling and testing the product. Just a couple years ago, a stand-alone power
line transceiver used to cost around $20. The PL-3120 should be under $10 in
single unit quantity at launch.
This new product has been highly anticipated as it allows device makers to
retain their silicon investment while adding connectivity with a single device
at a market leading price point. Combined with then new i.Lon gateway
products, Echelon is able to offer materially lower priced solutions with an
order of magnitude in terms of greater functionality.
Balance Sheet Items:
The company retains a very solid balance sheet with $134 million in cash, no
long-term debt, $9 million lower high quality receivables for a total of $23
million. Days sales outstanding decreased from 86 to 66 days sequentially, due
primarily to the change in Enel contract manufactures and also the timing of
other payments received by the close of the quarter. Core days outstanding
were 51 while those related to Enel were 77, down from 103 days.
We continue to believe Echelon's technology is disruptive and will change the
way everyday devices impact our daily lives, increasing functionality and
lowering operating costs. There have been so many press releases over the past
couple of years, including some from very large companies, about how their
technology was going to revolutionize device networking. Competition continues
to go by the wayside with the demise of GE Smart, the continued difficulties
at Lantronix, emWare and others.
We believe Echelon alone has the combination of true peer-to-peer networking,
scaleable standardized, large commercial deployments, with customers
representing the top device makers in virtually every market and geography.
The rest of the field still appears to be at the starting gate.
Valuation and Risk
Our new price objective of $16 per share is consistent with our assumption of a
P/E multiple of 40 times our fiscal 2003 earnings estimate and would be in
line with five times price to sales, well below the five-year median of 12
times. We are using more conservative multiples of revenue and earnings growth
rates to set our price objective as a way to discount for the risk exposure to
quarterly results and lack of longer-term visibility. Risks that could keep
the company from attaining our projected operating results include lower
upfront cost competitive products, the inability to drive end user demand for
open standards products and dependence on key customers including Enel at over
60 percent of revenues.
Echelon Corporation
January 23, 2003
Buy/Speculative
ELON/Nasdaq/11.15
Price Objective: 16
Price Objective Changes
=======================
Date Price New PO
---------- ---------- ----------
08/09/2000 40.25 50.00
04/09/2001 11.61 35.00
09/28/2001 12.48 26.00
10/11/2002 10.65 16.00
* NA: Positive rating removed; no price objective supplied.
Rating Changes
==============
Date Price New Rating
---------- ---------- ------------------------------
08/09/2000 40.25 Accumulate/Speculative
09/29/2001 12.48 Strong Buy/Speculative
The best weapon against "fear" is "facts"!!
Adams Harkness Cuts Echelon To Mkt Perf
by: jxt5 01/23/03 09:23 am
Msg: 110305 of 110305
*DJ Adams Harkness Cuts Echelon To Mkt Perf From Buy <ELON
01/23/2003
Dow Jones News Services
(Copyright © 2003 Dow Jones & Company, Inc.)
01-23-03 0922ET
The best weapon against "fear" is "facts"!!
Prudential is dropping coverage of this stock.
ELON: DROPPING RESEARCH COVERAGE
Echelon Corp. ELON / $12.42 / OTC
Nicholas P. Heymann • 212.778.1467 • nicholas_heymann@prusec.com Current: None
Mohammed Ali • 212.778.1534 • mohammed_ali@prusec.com Prior: Hold
Risk: --
Target:
Industry: Market Underperform
All important disclosures can be found at the end of this report.
FY EPS P/E 1Q 2Q 3Q 4Q
Actual 12/01 $0.15A 82.8X $0.00A $0.00A $0.02A $0.13A
Current 12/02 $0.41A 31.1X $0.07A $0.12A $0.13A $0.09A
Avg. Volume: 200,000 Div/Yield: NA EPS Growth: NA
Market Cap: $493 m 52w Range: 22.40-8.40 P/E / Growth: NM
Shares: 39.68 m
HIGHLIGHTS
· Effective immediately, research coverage of Echelon Corporation by Prudential Securities is being
terminated because it no longer falls into our core coverage area. The last recommendation issued for
Echelon should not be relied upon going forward.
· Echelon reported 4Q02 EPS of $0.09, $0.01 above our estimate and previous guidance. However, this
compared unfavorably to the year-ago EPS of $0.13. Revenues for 4Q02 declined 5% year-over-year.
· Echelon's Enel utility deal has reached its full installation pace of 700,000 homes per month.
· Finmek, an Echelon supplier, risks not being able to provide letter of credit in Echelon's favor timely
enough and this could delay production of meters for the Enel project.
· Echelon's core business continues to be challenged by weak economic conditions
DISCUSSION
Effective immediately, we are dropping coverage of Echelon Corporation because it no longer falls into
our core coverage area. The last recommendation issued for Echelon should not be relied upon going
forward.
BUSINESS
Echelon Corp. (ELON), headquartered in Sunnyvale, CA, develops, markets and supports a family of hardware and software
products and services that enable original equipment manufacturers and system integrators to design and implement open,
interoperable, distributed control networks When installed, Echelon's LonWorks distributed control system enables devices to
become "smart" by being able to interact and communicate, as well as be remotely controlled and monitorable
The best weapon against "fear" is "facts"!!
The conference call in my opinion will add fuel to the already burning fire and this stock will go lower today. KO said his New Years resolution was not to make any more predictions about the next big contract, etc. LOL
Oh boy, not good.
Hence, if no one sees that big deal on the horizon, IMHO this stock isn't worth being in right now. That coupled with potential problems with Finmark, the macro economic picture and a potential war in Iraq all loom in the distance, any one of which can take this stock down.
Now - I believe this is a great company, but how the stock trades and the company balance sheet are two different things. LOL How many times have you heard that. My original entry point was going to be in the 8.50 to 9.50 range. I am going to lower my range from 6 to 8.50 I believe this is a great stock to have in one's portfolio, but IMO it will take year(s) before the value is realized.
Also look for a possible downgrade from an analyst or two.
The best weapon against "fear" is "facts"!!
Just for the record, I've owned this stock for years, although I move in and out at times. Currently, I'm out. I'm looking to get back in - in the single digits. Given the macro economics, the pending war in Iraq and this current quarter's report, I believe that will be a possibility in the near term.
As you can see last nights news is not being received that well. Stock is down as I type this over 10% today and it is only 10:16AM, plus I expect the CC to not provide any reasons for it to go up.
Happy Trading.
The best weapon against "fear" is "facts"!!
Conference Call today - should be interesting.
Echelon Corporation Has Moved Its Fourth Quarter Earnings Call to 2 p.m. PST, January 22, 2003
Monday January 20, 9:04 am ET
As Previously Announced, Echelon's Earnings Release Should Cross the Wire at Approximately 1 p.m. PST on January 21st, 2003
SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 20, 2003-- Echelon Corporation (Nasdaq:ELON - News) has moved the date of its quarterly earnings call for the fourth quarter from January 21, 2003 to January 22, 2003 at 2:00 p.m. PST. The company is moving the call due to a family emergency of one of its executives. The earnings announcement itself is still scheduled to cross the wire on January 21, 2003 shortly after 1:00 p.m. PST. Echelon is sending out this release regarding Q4-2002 only to comply with Federal Regulation FD.
Financial analysts will be notified by fax of the date change and which toll-free number they should call to access the Q4-2002 conference call. Other interested parties may listen in on the conference call via live Webcast at http://www.echelon.com. Alternatively, the general public may also access the call at 800/388-8975 (callers outside the US please use 973/694-2225); however, due to a limited number of available phone lines, the company asks that only those persons without Web access call this number.
The best weapon against "fear" is "facts"!!
SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 21, 2003--Echelon Corporation (Nasdaq:ELON - News) today announced financial results for the fourth quarter ended December 31, 2002, exceeding analysts' expectations.
"This has been an outstanding year for Echelon, and this quarter was no exception; we are very pleased to have again exceeded both our own and analysts' expectations," said M. Kenneth Oshman, Echelon's chairman and chief executive officer. "Our project with Enel to replace the 27 million electric meters in its service territory with LonWorks® enabled meters has reached its full production pace and continues to go very well. However, we do face challenges as Enel provides for the transition from the current metering kit to the PL 3120® Power Line Smart Transceiver. This transition should result in improved margins for Echelon but any transition 'hiccups' could cause temporary revenue reductions. Ultimately, we do not believe that these challenges will have any impact on the overall program. Also, Finmek, one of Enel's meter manufacturers, may not be able to extend an existing standby letter of credit in Echelon's favor in a timely manner, which could delay production of meters for the Enel project and ultimately adversely affect Echelon's revenues. In our non-Enel business, economic conditions across the globe remain tight, and we do not yet see signs of sustained improvement. Despite this continued economic weakness, based on the market reception of new products we recently released and our expectations for those planned to be released this year, we believe that 2003 will be a year of solid execution and growth for Echelon's non-Enel business."
Revenues for the quarter ended December 31, 2002 were $30.6 million, a decrease of 5% over revenues of $32.1 million for the same period in 2001. Net income for the quarter ended December 31, 2002 was $3.6 million, or 9 cents per share on a fully diluted basis, based on a weighted average of 40,556,000 common shares outstanding, compared to net income of $5.2 million, or 13 cents per share on a fully diluted basis, based on a weighted average of 40,612,000 common shares outstanding for the fourth quarter of 2001.
Revenues for the year ended December 31, 2002 were $122.8 million, an increase of 60% over revenues of $76.6 million for the year ended December 31, 2001. Net income for the year ended December 31, 2002 was $16.8 million, or 41 cents per share on a fully diluted basis, based on a weighted average of 40,725,000 common shares outstanding, compared to net income of $6.0 million, or 15 cents per share on a fully diluted basis, based on a weighted average of 41,141,000 common shares outstanding for the year ended December 31, 2001.
Gross margin for the quarter ended December 31, 2002 was 50.3% compared to 47.4% for the same period in 2001. Gross margin for the year ended December 31, 2002 was 51.2% compared to 51.4% for the year ended December 31, 2001. Total operating expenses for the quarter ended December 31, 2002 were $12.3 million compared to total operating expenses of $10.8 million for the same period in 2001. Total operating expenses for the year ended December 31, 2002 were $48.5 million, compared to $39.8 million for the year ended December 31, 2001.
There were a number of significant events and announcements during the fourth quarter, which are highlighted below:
At the LonWorld(TM) 2002 Exhibition and Conference held in Toronto, Canada, Mr. Shirou Yokota, Executive Officer and General Manager of Information Systems Division, Fuji Electric Co, Ltd talked about Fuji Electric's extensive commitment to the LonWorks platform as an Echelon Open Systems Alliance Logo Master Program member. Scott Burroughs, worldwide Commercial Segment Manager for Device Solutions for IBM's Pervasive Computing Division also gave a keynote address presenting IBM's vision of the eBusiness to Smart Devices initiative.
Echelon introduced the new, second generation LPT-11 Link Power Twisted Pair transceiver at the LonWorld event. The LPT-11 transceiver sends both power and control data over low-cost, twisted pair wiring making it very well suited for use in lighting, fire/life safety, security, access control, HVAC, and factory control markets, as well as a wide variety of custom home, building, and industrial automation applications. The LPT-11 transceiver eliminates the need for expensive local power supplies at the device by distributing power from a central power supply using the same wires as those used for network signaling. As previously announced, Echelon expects the LPT-11 transceiver to start shipping in volume this quarter.
Also at the LonWorld event, Echelon announced its support in establishing PLUG, the Polish LonUsers® Group, bringing the total count of European LonUsers International groups to 13. PLUG was formed in response to growing momentum and support for the LonWorks platform in the region.
In November, Echelon appointed Michael E. Lehman, the former Executive Vice President, Corporate Resources and Chief Financial Officer of Sun Microsystems, Inc., to its Board of Directors.
In December, Echelon announced that the Building Control Solutions business of Honeywell has incorporated Echelon's LNS® software platform and network operating system into its flagship product line for building automation and controls. Honeywell released its new LNS based CARE(TM) 4.0 network configuration and engineering software. Additionally, Honeywell's Excel® 10, Excel 50, and Excel 500 products all include LonWorks networking. Honeywell has also created LNS device plug-ins for the Excel 10 devices within the EXCEL 5000 OPEN(TM) System enabling the company to offer an open, LNS and LonWorks based building automation backbone.
As discussed in Echelon's December 3rd mid-quarter analyst call, last quarter Echelon began shipments of the i.LON(TM) 100 Internet Server, the latest extension to the i.LON family of Internet connection products. Where the i.LON 1000 Server provides extremely high performance device to device communications routing over the Internet or any IP channel and the i.LON 10 Ethernet adaptor is well suited for low cost and small installations requiring a direct Ethernet connection to LNS based service centers, the i.LON 100 adds low cost system level applications and the ability to connect any LonWorks network to industry standard web services or other XML aware software.
For those interested in further discussion regarding this release, Echelon's management will participate in a conference call tomorrow, January 22, at 2:00 pm PST. To access the conference call, dial 1-800-388-8975 (callers outside the US please use +1-973-694-2225) no earlier than 10 minutes prior to the start of the call; however, due to a limited number of available phone lines, the company asks that only those persons without Web access call this number. The call will be available live tomorrow, and for playback on the Investor Relations section of Echelon's web site (www.echelon.com) through January 28, 2003.
About Echelon Corporation
Echelon Corporation is the creator of the LonWorks platform, the world's most widely used standard for connecting everyday devices such as appliances, thermostats, air conditioners, electric meters, and lighting systems to each other and to the Internet. Echelon's hardware and software products enable manufacturers and integrators to create smart devices and systems that lower cost, increase convenience, improve service, and enhance productivity, quality, and safety. Thousands of companies have developed and installed LonWorks products and more than 24 million LonWorks enabled processors have been shipped for use in homes, buildings, factories, trains, and other systems worldwide.
The protocol underlying LonWorks networks and the signaling technology used by Echelon's power line and free topology transceivers have been adopted as standards by the American National Standards Institute (ANSI). Echelon is also a founding member of the LonMark Interoperability Association, an open industry forum of hundreds of leading manufacturers, integrators, and users dedicated to promoting the use of interoperable LonWorks devices. More information is available at http://www.lonmark.org. Further information regarding Echelon can be found at http://www.echelon.com.
Note to Editors: Echelon, LonWorks, LonUsers, LNS, and the Echelon logo are trademarks of Echelon Corporation registered in the United States and other countries. LonWorld and i.LON are trademarks of Echelon Corporation. Other marks belong to their respective holders.
This press release may contain statements relating to future plans, events or performance. These statements include statements related to the expected pace of the Enel project, including the timetable for transition to the PL 3120 Power Line Smart Transceiver by Enel and Finmek's ability to extend its standby letter of credit in favor of Echelon; the performance of non-Enel business; Echelon's overall performance and execution for 2003; and the timing of LPT-11 transceiver shipments. Such statements may involve risks and uncertainties, including risks associated with uncertainties pertaining to the timing and level of customer orders, demand for products and services, risks that the R&D activities or subsequent product deployment activities with Enel are not successful, do not meet their target dates, or are terminated, or that the contemplated transactions are challenged by third parties, risks that our development projects with other parties are not successful, risks relating to the development and growth of markets for Echelon's products and services and the ability of those products and services to meet customer and consumer expectations, and other risks identified in Echelon's SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Echelon undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
The financial statements that follow should be read in conjunction with the notes set forth in Echelon's Form 10-K when filed with the Securities and Exchange Commission.
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ECHELON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December December
31, 31,
2002 2001
ASSETS
Current Assets:
Cash, cash equivalents and short-term
investments $ 134,489 $ 111,653
Accounts receivable, net 22,930 29,113
Inventories 7,991 10,316
Other current assets 3,217 11,556
---------- ----------
Total current assets 168,627 162,638
Property and equipment, net 16,677 16,480
Other long-term assets 22,188 6,536
---------- ----------
$ 207,492 $ 185,654
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,993 $ 7,409
Accrued liabilities 3,773 2,426
Current portion of deferred revenues 2,541 1,055
---------- ----------
Total current liabilities 12,307 10,890
---------- ----------
Deferred rent 167 47
Total stockholders' equity 195,018 174,717
---------- ----------
$ 207,492 $ 185,654
========== ==========
ECHELON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Twelve Months
Ended Ended
December 31, December 31,
(unaudited)
2002 2001 2002 2001
REVENUES:
Product $ 30,295 $ 31,763 $121,454 $ 74,777
Service 286 338 1,380 1,812
--------- --------- --------- ---------
Total revenues 30,581 32,101 122,834 76,589
--------- --------- --------- ---------
COST OF REVENUES:
Cost of product 14,483 16,292 57,059 34,842
Cost of service 730 606 2,880 2,347
--------- --------- --------- ---------
Total cost of revenues 15,213 16,898 59,939 37,189
--------- --------- --------- ---------
Gross profit 15,368 15,203 62,895 39,400
--------- --------- --------- ---------
OPERATING EXPENSES:
Product development 5,055 4,820 21,456 17,028
Sales and marketing 4,358 4,316 17,291 15,787
General and administrative 2,839 1,703 9,711 6,942
--------- --------- --------- ---------
Total operating expenses 12,252 10,839 48,458 39,757
--------- --------- --------- ---------
Income/(loss) from operations 3,116 4,364 14,437 (357)
--------- --------- --------- ---------
Interest and other income, net 844 1,083 3,777 6,655
--------- --------- --------- ---------
Income before provision
for income taxes 3,960 5,447 18,214 6,298
Provision for income taxes 317 218 1,457 252
--------- --------- --------- ---------
NET INCOME $ 3,643 $ 5,229 $ 16,757 $ 6,046
========= ========= ========= =========
NET INCOME PER SHARE:
Basic $ 0.09 $ 0.14 $ 0.42 $ 0.16
========= ========= ========= =========
Diluted $ 0.09 $ 0.13 $ 0.41 $ 0.15
========= ========= ========= =========
SHARES USED IN COMPUTING
NET INCOME PER SHARE:
Basic 39,685 38,502 39,468 38,443
========= ========= ========= =========
Diluted 40,556 40,612 40,725 41,141
========= ========= ========= =========
ECHELON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Twelve Months
Ended
December 31,
2002 2001
Cash flows provided by (used in)
operating activities:
Net income $16,757 $ 6,046
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 4,062 2,322
In-process research and development 400 --
Provision for doubtful accounts 55 210
Deferred compensation expense 31 184
Loss on disposal of fixed assets 7 74
Change in operating assets and liabilities:
Accounts receivable 6,161 (19,775)
Inventories 2,325 (4,571)
Other current assets 8,354 (6,353)
Accounts payable (2,183) 3,209
Accrued liabilities 1,194 820
Deferred revenues 1,445 (51)
Deferred rent 120 44
-------- --------
Net cash provided by (used in)
operating activities 38,728 (17,841)
-------- --------
Cash flows used in investing activities:
Purchase of available-for-sale short-term
investments (86,647) (79,454)
Proceeds from maturities and sales of
available-for-sale short-term investments 75,520 24,162
Unrealized gains (losses) on securities (178) 695
Purchase of BeAtHome.com, Inc. (5,811) --
Purchase of restricted investments (10,526) --
Change in other long-term assets 358 (5,769)
Capital expenditures (3,425) (15,256)
-------- --------
Net cash used in investing activities (30,709) (75,622)
-------- --------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock 3,106 2,549
Repurchase of common stock -- (3,191)
-------- --------
Net cash provided by (used in) financing activities 3,106 (642)
-------- --------
Effect of exchange rates on cash: 584 (327)
-------- --------
Net increase in cash and cash equivalents 11,709 (94,432)
Cash and cash equivalents:
Beginning of period 23,232 117,664
-------- --------
End of period $34,941 $23,232
======== ========
--------------------------------------------------------------------------------
Contact:
Echelon Corporation
Steve Nguyen, 408/938-5272
qnguyen@echelon.com
Chris Stanfield, 408/938-5243
cstanfield@echelon.com
Re: There is a bit to wade through here....
Not sure just how Microsoft would partner with Echelon, but I sure like the idea, so long as Billy doesn't go getting ideas about buying them.
As a side note, take a look at the 1-year chart for that XML company mentioned as a no-brainer at the bottom of the article. Is this like shooting fish in a barrel or what!
DickMN
A picture is worth a thousand words...
In this case it might be worth a thousand shares. 
"Ken Oshman, Echelon's chairman, president and chief executive officer, demonstrated energy management applications such as those highlighted in the National Energy Policy. Mr. Oshman showed how homes, buildings and factories networked with the company's technology platform can enable them to use energy more responsibly and allow utilities to better match supply to demand."
http://www.echelon.com/Company/News/June28MeetingWithThePrez.htm
DickMN
Never mind the blank look on W's face. He's still da man!
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Echelon Corporation (Echelon) develops, markets and sells system and network infrastructure products. To the building, home, industrial, transportation, and other automation markets, the Company sells a suite of network infrastructure products to original equipment manufacturers (OEMs). OEMs design in, or embed, its products into their products and systems in order to give their products local intelligence and networking capability. Echelon's LonWorks Infrastructure (LWI) products (the products that it sells to OEMs) include transceivers, control modules, routers, network interfaces, development tools, and software tools and toolkits. Representative customers include BOC Edwards, Fuji Electric, Honeywell, Invensys Intelligent Systems, Johnson Controls, NTT Data, Samsung, Schindler Elevator, Siemens and TAC AB.
550 Meridian Avenue
San Jose, CA 95126
(408) 938-5200
(408) 328-3843
stanfield@echelon.com
http://www.echelon.com
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