Hi Everyone...
I thought you might be interested in the conversation I just had with SMCI's CFO, Ron Trepp.
1. He said that the $2 million contract that was expected to be signed by the end of last quarter will likely be signed within the next few months. He has no doubt that it will be signed, but the company (which he did not name)is a very large International company requested a delay so that their CFO can look over the contract.
2. I asked him if SMCI is losing business to AZPN. He said no. He said that AZPN's business is 50% services, whereas SMCI's is only 5% services. AZPN and SMCI are like apples and oranges, although they do share some of the same customers. He also said that a great deal of companies that are customers of both AZPN and SMCI use both technologies, and not one in preference over the other.
3. When contracts come up for renewal, all contracts are renewed.... across the board, 100%.
4. He said that a big moment for the company will be the release of the ROMEO software, which is slated for late in the 2nd quarter (probably in June). He said that this technology is unrivaled in the marketplace, and will be a big boost to future earnings... several of their current customers are anxiously waiting for its' release. Shell Oil has been helping them in the development of it.
5. On Tuesday, they will be meeting with the institutional shareholders, which currently hold 75% of the available shares. He said that there has been some institutional sell-off, and he feels that those who did sell were primarily "momentum players", and with the bad news on Friday, they jumped ship. (* personally, I think he is right... I also think that these same sellers will also be buyers when the stock price begins to show some strong recovery). He also said that the largest institutional holder (Putnam) is still holding, and there is a conference next week that SMCI will be attending. I am not sure if it is a "trade-show" sort of conference, or a conference of prospective investors, but he seemed to think it might help the share price.
6. In regards to the news on last Friday, the charges that were taken against the gross earnings (the gross earnings WERE in line with analyst's expectations), were R&D of the Romeo Product. (It seemed to indicate that R&D expenses are written off at year-end, and not by quarter). He said that the $2 million contract that they have been anticipating would have offset the R&D, and this is what they were expecting. Unfortunately, the timing did not happen the way that it should have.
I got the impression that the $2 million contract is a "done-deal", but it was not(yet) completed because of the size of the customer, and the way that they conduct business.
6. We discussed the value of the company. He said that book value of the company is $6 per share, and at $7 per share that this is a bargain. (I think that it is a KILLER BARGAIN... considering that the growth rate is at 33% per year!)
My overall impression of the conversation is that this company is definitely going places. He did not try to "snow-ball" me whatsoever. They are concerned about the share value, and will try in the coming weeks to restore confidence in them. We must not forget that SMCI is a very small company, but they have some very big and powerful customers. The fundamentals and customer base of SMCI are the same as they were before the drop in share price, and the growth prospects with the upcoming ROMEO product are excellent.
I think that the institutions who sold last week (some down to the $5 3/4 range)were OUT of their MINDS!!!!!!! "Glad to see you go, don't let the door hit you on the way out!" :)... because they will be buying my shares a year from now at $20. The more research I do on SMCI, the more and more I like this company (and *I* don't like anyone <g>).
Peggy |
