Margureite, you are comparing apples with oranges, although I admit my long-winded analyses are probably confusing at times. In general, I would find it unsettling for any company to routinely record such a large percentage of their sales volume so late in a quarter. (More difficult to monitor/adjust expenses to keep them in line with revenues) However, in MDEA's case, the CEO had told me that revenues were off significantly in 1Q97 due to their product line transition and that they hadn't really shipped any product for the first 6-8 weeks of that quarter. This interruption in their sales channel was confirmed by the CFO in a later conversation. Hence, I was encouraged that even though 1Q revenues were down, most of these sales were booked in the final (short) month of February, proving that once the new product line had shipped, sales were back up strongly. Taken even further, one might fairly conclude that had the new product line been available throughout the entire quarter, MDEA would have booked a record quarter. (If >50% of 1Q revenues of $11.5M were made in Feb., then at least $5.75M occurred in February. Extrapolate another 2 months at this sales volume and you come up with $17.25M, which would be a record quarter for post-spinoff MDEA.) Of course, we won't know if this sales momentum has continued into the current quarters until the next earnings report date.
In Avid's case, there have been no significant product transitions recently to interrupt the sales channel; their systems have been available for sale throughout the quarter. Considering they have had difficulty bringing expenses into line with sales, I find this unsettling. Why is it that they book so much of their sales revenue late in the quarter? This would be a good question for AVID IR, as was the one re Accounts Payable.
>>I still own Avid's stock; should I be unsettled or encouraged?<<
I think you know that I have been bearish on AVID since last fall, and even more so now that it has jumped up on the Intel news and the return to profitability, with each being way overblown. I still love and use their products, but that doesn't mean it is a good investment. Would I buy AVID at $21? Absolutely not. MDEA is also a great company with great products, but has been a terrible investment for the past year as well. Would I rather be holding MDEA at $6? Absolutely. But this next quarterly report will most crucial for both companies, as the NLE market has matured considerably and the rules have changed somewhat. I'm still betting that MDEA will have a resurgence of sales volume increases, while AVID will continue to show flat or near-flat revenues along with a modest increase in earnings.
I recall that you picked AVID up near book value. If I were sitting on >100% profit with AVID after buying in at its recent low, I would probably sell and wait for a pullback (inevitable IMO--refer to my earlier posts) or move on to something else. Even with such a safety cushion, I doubt I would continue to hold it, as I don't see any more short-term upside potential. Now, if I had purchased AVID last year in the $16-$20 range and held it through the drop to $9, I'd certainly sell now and thank my lucky stars. One thing I'm still re-learning: it's not always what stock you choose or when you buy it, it's knowing when to sell. AVID will continue to hold down costs and tweak earnings, but is far less likely to post sales volume gains of >50% like in the old days (much less current projections of 20%), than it was a couple of years ago. Good luck whatever.
As always, do your own research!
D. Kuspa |
