Here's some analysis:
"Merrill Lynch said it was concerned about the company's quarterly results and outlook, citing light cable modem shipments and lower proprietary sales. . . . Gross margin improvements also slowed, while second quarter revenues were below sequential growth of other broadband access equipment companies, it said. See dailynews.yahoo.com
The information supporting the downgrade is information that IMHO, could have been conveyed to the Street at some point earlier than the Q announcement, at least in part, because it is indicative of a trend inconsistent with earlier guidance by the company.
As far as valuation, yes, the valuation of this company relative to sales is getting more akin to dot-com operations where there is doubt as to when such operations will achieve profitability. The Street today has much less patience today than it did a year ago with respect to waiting for profitability.
IMHO, the risk that runs with CMTO is commoditization of some of its product line notwithstanding its proprietary technologies on some of its modems. The issue becomes one of margins on those products that represent volume shipments and the lion's share of the company's revenues.
Obviously, the picture being painted following the announcement and the conference call is not the same picture held prior to the announcement. There are clear disappointments, which IMHO, add to the fears as to when CMTO will become profitable, and to what extent. |
