Daskin:
As far as I see it, the reasons to be bearish on PCMS are as
follows:
a) An extremely leveraged balanced sheet (i.e. lots of debt)
with most of the book value taking the form of goodwill
due to several acquisitions (Cylink ... ) in recent years.
b) In December 98, PCMS issues $15M in convertibles which became
floorless in mid-May. A standard technique for the convert holders
is to short the common while collecting interest on the converts.
When the price will get low enough, they can then convert
and gain a huge portion of the company (a $1/sh, the $15M
would be worth 15 million shares).
c) The main hope for PCMS is its point to multipoint products,
for which it is allied with Siemens. The competition in this
market will be very severe with all the major players: NT,
LU, CSCO + MOT (see today's announcement re. Bosch Telecom),
GMH ... fighting for a piece of the pie.
d) PCMS's management is rather poor, and a lot of the talent
has left the company to go with competitors such as Netro.
Bottom line: PCMS's main hope is a Siemens or LU buyout. LU's
point to multipoint system might need higher performance
components than the first generation system it got when it
purchased HP's LMDS division.
Others on this thread will probably tell you this is a buying
opportunity. I plan to stay on the sidelines until the floorless
converts are out of the way, and reassess at that time.
Best regards,
Bernard Levy |
