Things Mr. Market (maybe) thinks is wrong with the picture:
1. Telco spending cuts will affect "traditional" long distance voice widgets such as DITC's echo cancellers.
2. A slew of "insider" sales earlier in the year, most of which were from the VC community and some from shares issued in acquisitions.
3. The optics biz is unproven in terms of revenues from new products.
4. Atmosphere Networks acquired earlier in the year specialized in the ATM protocol, which is probably a loser to GigE in the metro area. DITC management recognized this, and it was reflected in the relatively low acq price. Open question is whether under the management of Ian Wright (formerly from Cisco) the new optics products can hit any kind of sweet spot in the market, as well as whether the sales & marketing force, mainly devoted to long-haul carriers such as Quest, can adapt to other segments.
5. DITC's wireless echo cancellers to my knowledge have not been awarded any significant design wins by the big infra players such as NT, LU, ERICY, MOT, etc. These widgets, I think, are most effectively sold through the infra guys and not direct to carriers.
6. DITC is a calendar month behind the typical quarter, so "earnings warning" risk is still out there.
7. At one time a sizeable contingent of the day-trader tribe played over here; most seem to have departed for greener pastures.
Just my thoughts on what's not to like.
On what's to like:
1. As Mark Twain might say, reports of the death of teleco spending are greatly exaggerated.
2. Some of the new optics products appear fairly useful.
3. In a component-constrained environment for (many) optical widgets, world class sales & marketing is not the key success factor in generating sales.
4. Appears to be a decent management team, competent engineering group, etc. Could be an acquisition target.
Hoping that we get some decent forward guidance in the earnings CC which won't be for a bit more than a month from now. |
