Mark, thanks for promoting some discussion while we wait for the 'street' to discover what we think is happening with WSTL.
Re: the 'distraction' of having both TAP and DSL business lines, I don't consider it to be so either. True, it makes 'peer valuations' more difficult, but the diversification provides a smoothing out of revenue for WSTL, quarter to quarter.
Regarding 'crossover' of engineering staff, while the legacy TAP products certainly dealt more with analog systems (Lipolymer, capt_smartjack and others could elucidate more on this), the HDSL 'synergies' alluded to should indicate similar core competencies between the two companies. Note the ongoing R+D performed by WSTL for Fujitsu, and the 'miniDSLAM' that will be more visible the next quarter and forward from there. The next real step will be into SDSL, and VoDSL products. WSTL is working on both.
The CPI division will likely be spun off when the full value can be obtained, sometime a year out or so. I don't expect it to be a WSTL subsidiary two years from now, for instance.
Finally, the 'value' of the stock apart from DSL CPE business isn't just the $6-8/sh from WSTL legacy, but you should factor in the legacy TLTN business ($20-25/sh TLTN value, but accounted for dilution due to merger), and the growth in the 'legacy' businesses (including CPI, which only really popped recently). Also, the DSL business is already more than CPE; I expect we'll hear more about DSLAM cards sold through Fujitsu to BT this quarter and going forward, in addition to the 'miniDSLAMs' mentioned above, and various other software upgrades to existing products. Etc.
Finally, regarding 'explanations' for wild fluctuations in the stock price, I would look no further than the skittishness of the market. The institutions want to lock in all gains. While the move over $30 after the last quarter was fully justified on a peer basis relative to EFNT (and maybe WSTL deserved even higher), the institutions covering the stock have been conditioned to trade in and out. Shorts have had fun this year in the market, with many different stocks. When they rotate from sector to sector, and stock to stock within a sector, promoting campaigns of FUD and massive shorting, it has proven more profitable to join in the game and unload stock to buy back later, cheaper. Doesn't mean you don't like the stock. It's all about making money. There will be a time in the future when the economy is more clearly prosperous, and the shorting and 'front running' game will be a losing proposition... those who sell then will never be able to buy back without paying up. Will one of the upcoming quarters be the one that breaks this pattern for WSTL in particular? Anyone have a working crystal ball, lately?
Regards, Rich |
