Here's the "word on the street" explanation for the price drop...
(Found on Yahoo! with the subject line: RealMoney.com)
>Why Did ACT Manufacturing Get a $50
> Million 'Advance' From a Customer?
> By Herb Greenberg
> Senior Columnist
> 7/24/00 6:30 AM ET
>
> From the sublime to the bizarre:
>
> Anatomy of a stock drop: Contract manufacturer ACT
> Manufacturing (ACTM:Nasdaq - news - boards), whose shares
> had been acting quite well in recent months, tumbled 19%
> Friday after word spread that the company received a
> $50 million loan from Efficient Networks (EFNT:Nasdaq -
> news - boards), one of its customers. (Not what you want to
> see with a company whose operating cash flow is plunging --
> and I do mean plunging -- while long-term debt is climbing.)
> The supposed loan, which I mentioned late Friday on
> RealMoney.com's Columnist Conversation, was disclosed a few
> days earlier on Efficient's earnings conference call, but
> hadn't become "news" until an analyst apparently started
> chatting it up.
>
> Why would/should anybody care?
>
> Because it's not usually good news when a company gets a
> loan from a customer.
>
> But was it a loan? Not technically. Efficient CFO Jill
> Manning told me it was more like an interest-free "advance"
> against future contracts and a way for Efficient to secure
> a top spot in ACT's manufacturing lineup. "This is a tight
> component marketplace," she said, and Efficient wanted to
> make sure "we were No. 1 on the list" to get its products
> assembled.
>
> So, who approached whom with the idea? Manning's answer:
> "We work very closely with ACT. We meet with them a couple
> of times a month. We were trying to work out a strategy
> that helps us and them, and we came to an agreement.
> We've told them they can use that cash for several
> quarters. Once the component marketplace eases up, and
> we're more comfortable, then we'll say we owe ACT for
> inventory and deduct the balance. It's an advance, and we
> will definitely bill $50 million in inventory with them.
> We'll do that this quarter, but we won't take it down,
> and there's no risk to us because we constantly owe ACT
> money."
>
> All of which is fine; it's just not something you see every
> day. ACT, which was mentioned here recently for earnings
> quality issues, reports its earnings Thursday.
> ACT officials couldn't be reached.
I can vouch for the veracity of this last sentence. I've been
trying to reach Jeff Lavin, CFO for ACT Manufacturing, since
Friday morning. While his assistant, Anita Gregory, has offered
nothing more than the promise that Jeff would call me (she
wouldn't even acknowledge that Efficient is an ACT customer),
that call has not yet been received. Presently, I have calls
in to both John Pino, Jeff Lavin, and Anita Gregory.
Until they start returning calls, and openly explain (perhaps
via a press release) just what's going on, I expect the stock
price will continue to fall.
Rob |
