Is Trikon running out of cash? Will Trikon survive? Q1 report raises serious doubts as to whether Trikon can continue as a going concern.
Tried to be brief, but there are many serious issues.
A.
17.4 Mil Shareholder Equity
39.2 Mil Intangible assets
102.9 Mil Debt
Tangible shareholder equity is (negative 21.8 Mil), with 102.9 Mil debt. The debt is twice the market cap, with little cash on hand. Not much comfort here.
B.
Inventory 380 days
"Demonstration System" 40 days
Inventory increased 10 fold since the beginning of 1996 without corresponding increase in sales. Why does Trikon have so much inventory/Demonstration-System? Will Trikon need to take a big hit to write down/write off all these inventory, in this highly competitive rapidly advancing industry?
C. AR/DSO 177 days: Very high AR/DSO, why?
Will Trikon be able to collect? Did Trikon push Q2 revenue into Q1? High AR/DSO is often used by management to make a quarter look much better than it actually is, as if Trikon's results are not bad enough as reported. Look at what happened to many companies' subsequent quarters after reporting high AR/DSO. Among recent examples are Shiva, Cascade, Clarify.
D. The company appear to be running out of cash. It appears that Trikon will run out of cash in one month, calculating from cash burn rate and the amount of cash/short-term-investment.
E. Where is the Trikon going to get the money to continue operation?
More debt ? Trikon is already in violation of debt convenant. Trikon is trying to avoid cross default that will result in $103 Million coming due immediately. That would surely cause bankruptcy filing.
How about R&D limited partnership? Trikon may have a bad reputation in this area. The limited partners in the R&D limited partnership (started only 12 months ago) are pretty upset with Trikon. Lega action may be on the way. Those limited partners probably won't be interested in funding Trikon's any more.
Improving business condition? The management expects continued industry weakness.
Sell technology/patents? Which technology, to whom, and for how much?
Equity infusion? At current price adjusted for discount, it will take massive dilution to existing shareholders to raise enough money to fund operation.
F. Why did gross profit margin declined dramatically from 52.3% to 18%.
Did Trikon have to significantly undercut competitors in price to move its products? I doubt companies in this industry can survive on 18% gross margin.
18% gross profit margin does not cover
Sales&GA expense 58%
R&D expense 41%
Amortization 7.5%
interest 19.6%
Unless Trikon can raise the price of its products, gross profit margin will not increase with additional sales. In fact, counting incremental sales expense, Trikon appears to be losing money on incremental sales, let alone covering the substantial fixed costs.
G. Is Trikon losing out to competitors? Competitors such as Applied Material and Novellus continue to have solidly profitable quarters. But Trikon has massive operating loss.
Of course, it's always possible for any company to invent some miracle product that will save the day. If Trikon will have such a miracle product, it has better happen now, today--preferably yesterday. Time is running out.
All comments welcome.
Is there any one from Trikon here? Please tell me why all these concerns are non-issues. Thanks |
