I believe AT&T and Verizon's decisions to limit spending on capex are a result of the uncertainty acquiring spectrum. My thoughts are that these 2 carriers want to dominate spectrum and as a result are trying everything they can to put clearwire out of business. Democrats are aware of these tactics and doing everything they can to limit their power. Unfortunately, clarity might not be until its clear which party will control the Washington.
jWells
Friday, April 27, 2012
Oclaro $OCLR Price action and Theory
Oclaro $OCLR recent price action has been extremely painful. Very weak execution sits squarely on Alain Couder's management team. Its not that they aren't capable, they are, its just I think Alain is getting old and soft and would benefit to bring in some younger talent to get things in shape. There isn't much time as losses will continue to erode the balance sheet. They have agreed to merge with Opnext because the Thailand floods have limited innovation and thus placed both companies behind competition thus reducing market share in the future. This was a necessary merger to the existence of the companies. Integration will be challenging, but with all that is at stake, will be done effectively.
Thursday, April 26, 2012
Towerstream $TWER Carrier Deal is with....
Towerstream $TWER
I had previously written that I thought Sprint was the carrier that signed a contract with Towerstream. My logic was that Towerstream's network was built largely with Dragonwave product. Clearwire's network is largely built with the same products. My thoughts were that it would be easy to integrate a backhaul deal with Clearwire and thus Sprint would be the carrier that has contracted with Towerstream.
Today, Clearwire mentions that have "identified" (as opposed to build) 5000 nodes as a backhaul offload network in 31 markets to start in NY, Chicago, San Francisco, LA, and Seattle.
This confirms my thoughts, except perhaps Towerstream will have a deal with Spint through Clearwire as opposed to directly with Sprint. One thing that might be a bit different is Towerstream only mentioned San Francisco and NY on the conference calls as the two markets where a backhaul offload strategy would be deployed. So this is a possibly very good news and we will more than likely hear on May 10 the number of nodes used in the offload strategy climb. In effect, Each additional node adds $142k to market cap based on the buyout of NextG.
More on valuations later..
PS please click a commercial.
Thanks!!
jWells
I had previously written that I thought Sprint was the carrier that signed a contract with Towerstream. My logic was that Towerstream's network was built largely with Dragonwave product. Clearwire's network is largely built with the same products. My thoughts were that it would be easy to integrate a backhaul deal with Clearwire and thus Sprint would be the carrier that has contracted with Towerstream.
Today, Clearwire mentions that have "identified" (as opposed to build) 5000 nodes as a backhaul offload network in 31 markets to start in NY, Chicago, San Francisco, LA, and Seattle.
This confirms my thoughts, except perhaps Towerstream will have a deal with Spint through Clearwire as opposed to directly with Sprint. One thing that might be a bit different is Towerstream only mentioned San Francisco and NY on the conference calls as the two markets where a backhaul offload strategy would be deployed. So this is a possibly very good news and we will more than likely hear on May 10 the number of nodes used in the offload strategy climb. In effect, Each additional node adds $142k to market cap based on the buyout of NextG.
More on valuations later..
PS please click a commercial.
Thanks!!
jWells
Wednesday, April 25, 2012
Oclaro $OCLR
Oclaro $Oclr reports after the bell tomorrow. I am preparing a longer more in depth post to this one. It will be ready soon. But, for now Infinera just reported better than expected earnings today. This is significant as it was one of Oclaro's top 3 customers accounting for more than 10% of revenue. Oclaro is up in afterhours trading as it should be because for the last 2 weeks its done nothing but drop.
jWells
jWells
Tuesday, April 24, 2012
EasyLink $ESIC Valuation and Trading around Earnings
EasyLink was one of the first companies to harness the power of the Cloud to deliver a service. I will write more about the company later, but first, a word of caution. The stock price, before and after earnings for the last 2 reports, climbs into earnings announcements and then sells off hard. There are 4 reasons for the behavior.
1. Revenue dropped last quarter to $44.5m from $47. The reason is, they lost a low margin client to a Japanese carrier. I was sceptical, but their margins did go up.
2. Not many wallstreet firms cover it, much like Magic Software ($MGIC)
3. The business model doesn't have a lot of barriers to hold off competition.
4. Overhang of a patent suit from J2 Global.
So, what is to like:
1. The CEO Stallings, has made statements which have all come true. I really really like this. I have listened to at least half a dozen conference calls. So far this has been true.
2. Not many wallstreet firms cover it.
3. Operation income per share has doubled in 1yr.
4. Using Free Cash Flow to pay off the purchase of Xpedite. 1yr ago total liabilities for the company were at $145m today they are at $117m and likely to fall to 107m by next report.
5. Having some success in the Patent suit as some patents were upheld. The litigation is expected to end very soon.
6. Mostly all the management team is old IBM guys.
More on earnings:
This is a chart of revenue, cogs, gross profit, operating expenses, and operating income per share.
I like to use operating income per share because it eliminates a lot of noise you get quarter to quarter so you can focus just on execution. And you can see operating income has doubled in last 8 quarters.
On a Operating income per share basis with a 10 pe, you could value the company at $10. If you wanted to, you could reduce it down by the difference between current asset and total liabilities by another $1.60 and arrive at $8.40 as a price target in a few months or quarters. I think we will see this price in the coming months if, revenue doesn't decline and margins are solid, they continue reducing the note used to buy xpedite, and gets some color on the patent case.
Stock Price:
It recently broke through a resistance of $5.25 which is where it traded the day before the last earnings report. It will likely trade down after they report and you might be able to pick some up. They have recently been added to some tech suppliers in Europe. Most people think this would be bad with what is going on. My thought process since the financial crisis is that tech is the place to be as companies will reduce costs by adopting technologies to replace workers. So far, I have been right.
impressive customer list:
http://files.shareholder.com/downloads/ESIC/1383094715x0x359789/36ffa360-51b3-4cfb-8bb9-4f6bc8a88908/EasyLink%20Roth%20Conference%20Presentation.pdf
jWells
1. Revenue dropped last quarter to $44.5m from $47. The reason is, they lost a low margin client to a Japanese carrier. I was sceptical, but their margins did go up.
2. Not many wallstreet firms cover it, much like Magic Software ($MGIC)
3. The business model doesn't have a lot of barriers to hold off competition.
4. Overhang of a patent suit from J2 Global.
So, what is to like:
1. The CEO Stallings, has made statements which have all come true. I really really like this. I have listened to at least half a dozen conference calls. So far this has been true.
2. Not many wallstreet firms cover it.
3. Operation income per share has doubled in 1yr.
4. Using Free Cash Flow to pay off the purchase of Xpedite. 1yr ago total liabilities for the company were at $145m today they are at $117m and likely to fall to 107m by next report.
5. Having some success in the Patent suit as some patents were upheld. The litigation is expected to end very soon.
6. Mostly all the management team is old IBM guys.
More on earnings:
This is a chart of revenue, cogs, gross profit, operating expenses, and operating income per share.
I like to use operating income per share because it eliminates a lot of noise you get quarter to quarter so you can focus just on execution. And you can see operating income has doubled in last 8 quarters.
| rev | cogs | GP | Opex | Op inc | Op inc/share | |
| 10-1 | 20.5 | 5.50 | 15 | 11.7 | 3.3 | $0.11 |
| 10-2 | 20.5 | 5.50 | 15 | 11.7 | 3.3 | $0.11 |
| 10-3 | 23 | 6.50 | 16.5 | 14 | 2.5 | $0.09 |
| 10-4 | 47 | 17.50 | 29.5 | 23 | 6.5 | $0.22 |
| 11-1 | 47.7 | 16.40 | 31.3 | 23 | 8.3 | $0.28 |
| 11-2 | 46.8 | 16.40 | 30.4 | 24.9 | 5.5 | $0.18 |
| 11-3 | 47 | 15.70 | 31.3 | 24.2 | 7.1 | $0.24 |
| 11-4 | 44.5 | 14.57 | 29.9 | 22.05 | 7.89 | $0.24 |
On a Operating income per share basis with a 10 pe, you could value the company at $10. If you wanted to, you could reduce it down by the difference between current asset and total liabilities by another $1.60 and arrive at $8.40 as a price target in a few months or quarters. I think we will see this price in the coming months if, revenue doesn't decline and margins are solid, they continue reducing the note used to buy xpedite, and gets some color on the patent case.
Stock Price:
It recently broke through a resistance of $5.25 which is where it traded the day before the last earnings report. It will likely trade down after they report and you might be able to pick some up. They have recently been added to some tech suppliers in Europe. Most people think this would be bad with what is going on. My thought process since the financial crisis is that tech is the place to be as companies will reduce costs by adopting technologies to replace workers. So far, I have been right.
impressive customer list:
http://files.shareholder.com/downloads/ESIC/1383094715x0x359789/36ffa360-51b3-4cfb-8bb9-4f6bc8a88908/EasyLink%20Roth%20Conference%20Presentation.pdf
jWells
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