Ian, as I stated some weeks ago, there are balance sheets issues with this company. According to the company in the last quarterly CC, they built out inventories to sate the demand for product so they wouldn't be caught in a situation where they couldn't fill orders. We now know the orders never materialized. Hence they will be left with possibly an even greater inventory burden this quarter.
Receivables also grew way out of control last quarter. I pointed out some weeks ago that this could have been a precursor of bad things. Its quite likely last quarter was scam on these receivables. Essentially, they shipped product to somewhat unwilling customers on loose and generous terms last quarter, hoping demand would hold this quarter. It didn't.
If the receivables and inventory show no sequential shrinkage, which I predict they won't, it will prove last quarter was a scam on the bottom line. Rob Peter to pay Paul. These are the balance sheet issue I am talking about. Of the operating variety.
The fact that the company made a good investment in JNPR is irrelevant to the going business. Investors aren't paying them to be a money manager.
What's interesting is that with $5/share cash in the bank, WS values the business at about $9.5/share. An acquirer will certainly take note. However, $900M cash buys squat these days. Only the "real" currency of stock priceis allowing the bigs to get bigger.
BTW, another company with lots of cash, no debt to speak of, and a questionable balance sheet is COMS.
Gary |
