EXHIBIT 99.6
Prepared Remarks for Avocent Corporation Conference Call
Monday, March 14, 2005, 9:00 a.m. Central time
Following operator introduction of Samuel F. Saracino, Avocent
Corporation's Executive Vice President for Legal and Corporate
Affairs, General Counsel, and Secretary:
Mr. Saracino:
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Thank you and good morning. Welcome to Avocent Corporation's
conference call.
I want to remind all participants that this call will contain
forward-looking statements. These include:
o statements regarding our future business prospects and economic
conditions in general;
o statements relating to Avocent's revenue and sales (including our
revenue and net income estimates for the first quarter of 2005), our
operating and gross margins, our planned marketing expenditures, our
product and distribution plans (including packaging and pricing
plans), our international operations, our OEM and other customers, and
future expenses;
o statements about our engineering and design activities, the
development, introduction, and marketing of new products and
technologies, and the size, growth, and leadership of the potential
markets for these products and technologies in the future; and
o statements relating to the integration of the operations, products,
and technologies of the companies we have acquired, and the future
revenue attributable to them.
These forward-looking statements are based on current expectations
that involve a number of risks and uncertainties, which could cause
our actual results to differ materially. These risk factors are
described in our periodic SEC filings (including our 2004 Annual
Report on Form 10-K which we will be filing later today).
As we have previously stated, Avocent Corporation intends to
comply fully with Regulation FD and we have adapted our investor
relations practices and procedures to do so. Any and all guidance
given to analysts and investors will be done only during this
conference call--either in our prepared statements or during the
question and answer session that follows. Accordingly, we encourage
you to ask any questions you have concerning Avocent, or our business
or prospects, during this conference call since we will not be
providing additional material commentary or guidance during one-on-one
conversations with analysts or investors.
I would now like to introduce John Cooper, Avocent Corporation's
Chairman and Chief Executive Officer. John....
Mr. Cooper:
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Good morning. By now you've read our press release issued earlier
this morning. I'm disappointed with this news and I appreciate you
taking the time to allow me to add some flavor to what you've already
read.
As we noted in our press release earlier today, our sales are
behind our forecast for the first quarter, and as a result, we have
revised our sales guidance to the $73 - $77 million range for the
first quarter of 2005. We are currently in the process of
re-evaluating the guidance we have previously given for the rest of
2005, and will have an update for you on that at our regular quarterly
conference call in April.
The sluggishness in our revenue has no simple explanation. No
single factor completely explains the drop in revenue we are
experiencing. Rather, there were a number of factors that combined to
have such a negative impact on our quarter. Let me provide you with a
list of the major factors that I believe compounded to create the
shortfall in revenue we have experienced to date.
First, the launch of our DSView3 software and our other new
products created confusion in the marketplace and even among some of
our resellers. We, as management, must take responsibility for not
doing a good job explaining the new features and functionality of
DSView3. From everything we have been able to learn, this is the
largest single factor impacting the quarter, and the good news is that
we believe we know what needs to be done to fix the problem.
Additionally, we've experienced some disappointment with a couple
of major accounts, affecting both branded and OEM channels. Our sales
to OEMs have been slower than the seasonal softening we typically
experience in the first quarter, with much of the shortfall being
attributable to one customer. On the branded side, a major deployment
of our product for a large customer that we planned on in our
estimates for the first quarter has been delayed. I do not want to
make too much of these issues because we experience some level of
disappointment each quarter, but usually there is enough good news to
offset the minor disappointments within a quarter. Part of the problem
this quarter is that this has not happened.
Finally, we need to acknowledge that the level of competition has
increased this quarter as a couple of our competitors are spending
significant amounts on advertising and promoting their products.
o We are aggressively pursuing corrective actions as quickly as
possible. We are making adjustments to the packaging and pricing of
the products we are selling.
o We are working with our sales force to more clearly communicate the
value proposition of the products and technologies we offer.
o As previously planned, we will increase our marketing expenditures
during 2005 to promote our brand and products and to increase customer
awareness of these products.
o We are accelerating previously-planned customer visits to re-confirm
our understanding of how our customers perceive the value of our
products and technologies and to validate the messages we want our
marketing efforts to deliver.
In summary, I believe our business model remains intact and
viable. We have just been buffeted by a series of mostly unrelated
circumstances in a short period of time. We will remedy the problems
with our launch of DSView 3 quickly and make it the most competitive
offering in the space. We expect our OEM business to return to normal
seasonal trends. Finally, we believe that the aggressive marketing
programs we already have planned will yield positive results as the
year progresses.
We expect our gross margin percentage for the first quarter to be
in the mid-50's due to lower revenue coverage of fixed costs. In
future quarters, we will work to manage our fixed expenses as
necessary to retain gross margins in line with what we, and you, have
come to expect.
We expect our operating expenses to be reasonably in line, in
absolute dollars, with our guidance issued on January 20th . With all
of these changes, which I'm sure you can understand we continue to
evaluate, our current estimate of operational earnings per share,
before the effects of intangible amortization and merger-related
costs, is in the range of 14 to 17 cents.
Thanks for listening. At this time I will open the discussion to
questions for both Dusty and myself.