The mergers with Convergence.com and Silicon Valley Communications significantly impact the financial
statements.
After the pooling of interests, CCBL
makes only 0.06 rather than 0.40ish in the June quarter.
This is a negative in that the past earnings
are lower than what CCBL had prior to the pooling.
The positive is that the combined earnings growth
is impressive - the June99 earnings are double
the March99 earnings. Margins improved sequentially
from Sept98-June99 (22%,24%,23%,27%).
The earnings from operations growth
should continue after the merger as product development
costs slow and sales from SVC's product line ramps
up. The growth of the combined SGA costs should slow
as duplicate functions are consolidated.
The 3rd Q should reflect a one-time merger
cost though.
From the June quarterly report:
"The financial results of Convergence.com Corporation and Silicon Valley Communications,
Inc. for the year ending June 25, 1999, reflect the fact that both companies were investing in
technology and infrastructure and incurred costs in excess of their revenues. In the case of
Convergence.com Corporation, this investment included the establishment of a state-of-the-art
network operations center in Suwanee, Georgia, that is capable of supporting a large customer
base going forward. In the case of Silicon Valley Communications, Inc., the investment
included development of a product line of fiber optic based distribution equipment designed to
meet the needs of broadband communication network operators." |
