John,
In addition to what you mentioned about MZ's damage control, it's also worth mentioning that it was a closed circle conference call that was cut off before many had a chance to ask questions. As much as the analysts seemed to be tossing soft pitches, the failure to address them fully and directly was discouraging.
The comments about WSTL's market share seemed to dodge the issue. They claimed to have maintained market share in the products and customers where they compete, but they implied that they don't have a broad enough CPE offering. This was a pretty limp way of addressing EFNT's beating estimates while WSTL fell so far short. They just said they needed to broaden their customer base, come up with new products and do a better job.
Another issue that was sidestepped was reduced margins related to reduced prices from their primary customers. Prices dropped faster than they could cut production costs.
This suggests that improved margins may be hard to come by, and WSTL may be faced with selling more units for less. If the market becomes increasingly commoditized, WSTL may be hard pressed to maintain market share, and more dependent on whatever new products they develop.
Comments on how increased inventory was a positive was hard to swallow. My take on it is that they didn't sell as much as they had hoped to and had excess product left on hand.
WSTL may take further hits as downgrades come out. I think it looks more likely that WSTL will face cash crunches going forward, and a low stock price will not make equity financing any easier. Perhaps that increases the likelihood that the company will be put up for sale.
Perhaps the expansion of DSL will float WSTL's boat, and the company will be able to exceed lowered expectations. However, expectations for .01 to .02 this quarter and .05 to .06 next quarter don't offer much to cheer about anytime soon. And the company has an increased credibility problem that will probably require demonstrable proof before many will become believers again. |
