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TWST: Could we begin with a brief overview and historical sketch of ADVA (XETRA:ADAG.DE)?

Mr. McCann: ADVA is a company focused in the metro optical networking space. We are a leading provider in the enterprise metro access space with a number one market position in Europe and a number three market position worldwide. Our focus has been both service providers and enterprises because a lot of times we see storage is the killer application that’s driving demand for carriers to address high bit-rate applications. We are a company that was founded in 1994, IPO’d in 1999 over in the German Exchange and effectively over the past two years have grown revenues from 60 million in 2000 to 90 million in 2001. So in a down year, we have introduced new products and are effectively addressing new services for high-speed optical application.

TWST: What impact did September 11th have? Did that wake up people to backup storage needs?

Mr. McCann: Yes, exactly. Obviously in light of what happened immediately all budgets were frozen and put to immediate fixes. So September-October time frames were difficult for everyone because every dollar was about fixing problem. But what became very high priority for them is disaster recovery. And that has been a leading application so we did see projects get released in Q1 that were somewhat sitting on the fence up until then. I mean a disaster recovery effort is upward of $10 million to $50 million investment for a large enterprise. So those projects began to move forward. We closed a project with a major bank in Germany that was 500 WDM application running between a primary and a backup site. This was a major financial institution and that enables them to now back up in seconds. A financial institution would lose million of dollars a minute, so the return on investment for them was great. It’s like an insurance policy and how much you really want to pay for insurance. When it is a family tragedy you tend to look at these things more closely.

TWST: Can you tell us about the Fujitsu partnership and what that will bring to the table?

Mr. McCann: The Fujitsu announcement was an OEM agreement for our FSP 500 and FSP 3000 system, these are carrier-class platforms for the access and the parts of the metro core. The agreement is a multi-year agreement and essentially positions our products into the Fujitsu product portfolio for North America. Fujitsu has over 50% of the SONET business in North America and over 30% of the entire metro market for SONET. So they bring us to their customers. They are bringing the products through the Telcordia OSMINE process, which is a very expensive and cumbersome process. They are integrating our platforms into their network management and essentially leveraging their relationships to bring us to those customers quickly. We have got several customers that have already been presented it. The product will be branded as a Fujitsu 7410 and 7420 products for the 500 and 3000 respectively and really gives us a leading edge partner, just as we have with Siemens over in Europe, to win the incumbent carriers in their infrastructure business.

TWST: Can you share your thoughts on how you see your respective markets changing over the next couple of years? What developments do you see materializing and impacting the optical equipment space?

Mr. McCann: In the case of the enterprise business, we have always dealt with the high bit-rate applications, which has been dominated by storage. And I think the trend, one of which we touched on before, is disaster recovery. It is becoming increasingly important and optical is an enabler. T3 services were a limiting factor if you paid $4000-5000 a month for a 45-megabyte service. With our platforms, carriers are offering at $3000 a month one gigabite per second pipe. So we become an enabler. Storage is clearly driving higher bit-rate applications. Also, in this industry of cost savings for the enterprise, there is more distributed access with optical; rather than keeping people in one location, companies are now distributing their people over four or five independent locations while having the same network performance because of the high speed connection options available by optical. In the case of the metro access, the incumbent carriers, the Verizon’s in the case of the East Coast, are slow to move when it comes to new service. One reason is because of their sheer size and regulations. But the other is that it tends to eat their old business, which is very high profit. But because the enterprise demand has been proven and the CLECS have shown that their business model can fit at least in some limited basis, we are now beginning to see a clear interest and business model moving forward from the incumbent carriers to go after these new high-speed optical wavelength services in the metro.