To all you PRST Bulls on this most amusing stocktalk board, what are you guys smoking? I have seen very little in the way of fundamentals being discussed here so lets begin.
1. Who cares about the patents? Fuji, Kodak, Polychrome amongst others don’t and their attitude is " if the installed base of QM-DI’s reaches a critical mass then they will be there with plates that can get around Presstek’s patents". I was told this directly by high ranking officers of each of those entities within the last two weeks. Don’t you think that Heidelberg would rather have a multitude of sources of supply for the QM-DI’s? They sure do and have approached each of the above in that regard. Certainly the end user, the press owner would much rather have numerous sources of supply of plates or any consumable for that matter. The last thing any consumer wants is a high priced proprietary product. This only limits the size of the ultimate market.
2. Why have there been so few QM-DI’s shipped since their splashy intro. at DRUPA in May 1995? The BETA units were plagued with wash-up problems occurring between the imaging of the plate and prior to printing in which the ablated carbon black material needed to be wiped off before printing. It is my understanding that Heidelberg is blaming Presstek for this problem and they have consulted with some or all of those names listed above in 1 above to help fix the problem. At present I understand that Heidelberg is restricting production to 10 a month with an eventual target of 20. Presstek stated on June 6, that they had shipped 195 Kits which according to my math, means that Heidelberg have a 9 to 18 month supply on hand and Presstek could be facing an inventory problem. Presstek also stated on June 6th that production is scheduled to increase to 40 per month commencing in Q2 1997. I am trying to get an official projection from Heidelberg, but 40 per month seems awfully ambitious.
3. The Printing plate business is a highly competitive global one dominated by the giants of the chemical world. The business is characterized as high volume/low margin, so it is utopian for the Carlton Lutts’ of this world to think that Presstek will be able to achieve 84% margins for ever into the future. By the way it should be of concern to you Bulls that Presstek has consistently miss-spelt the names of at least two of its potential competitors, Crosfield division of Dupont, and the Howson division of Dupont. See p 15 and 16 1994 and 1995 10K. You Bulls better hope that Presstek are better marketers than they are spellers!
4. Why did the order backlog shrink from $26.8 Million at the end of Q2 and Q3( p 12 & 11 respectively of 10Q’s) to $16.8 Million at year end? It is interesting to note that they did not provide the figure in the Q1 10 Q. These numbers don’t seem to reflect a rapidly growing order book from their one and only bona fide customer to date!
5. Having a part time CFO is the equivalent of a city having a volunteer fire department!
6. The hue and cry which has arisen over the patents in the last 6 weeks was all Presstek’s doing. You might recall that on April 27 1995, Presstek sued Agfa over misappropriation of trade secrets regarding Presstek’s direct imaging plate technology. The next day Agfa announced their intention to launch a patent infringement suit against Presstek. This was the last anyone heard about this matter until close examination of the 1995 10K announced that the legal action launched by Presstek in New Hampshire had been stayed in order for the arbitrators at The International Chamber of Commerce to determine the issues. It was during this arbitration process that Agfa produced substantial "prior art" such as the Eames patent of 1974 which of course is now in the public domain. Hence anything that Presstek has subsequently done in asking the patent office for a re-examination of the crucial plate technology patent has been a direct result of the arbitration process, not simply at the company’s request as reported by the company. Sounds like a lawyer splitting hairs here.
7. Most technology companies at the leading( or better bleeding edge) are headed by young management teams. If you look at the Proxy for this year’s AGM, you can make note of the fact that the average age of the Directors and senior officers is 62, and that number is significantly pulled down by the inclusion of Lawrence Howard at 43! Not exactly a Microsoft here.
8. Yes the PEARL technology has a niche to fill, but it will not be found in quick print shops around the land as it is a press and contrary to the company’s statements in the 10K (P4&5), less operator skills are not what is needed here. In fact due to it’s nature the QM-DI requires more skills in some ways as the press operator also needs to be well versed in the digital domain as well! In fact one requires at least five years of Adobe Postscript outputting desk top publishing files in order to receive a QM-DI in the initial rollout.
9. One of the limiting factors in the QM-DI’s global penetration efforts will be the lack of Desk Top Publishing capabilities in most areas outside of Europe and North America.
10. Further hindering this in Asia is the lack of software for word processing in the "character languages". So don’t expect to see QM-DI’s in Japan or China any time soon.
11. In terms of the larger format press, remember that Heidelberg had the right of first refusal to build any future presses incorporating PEARL technology and they passed on the 19 X 26 inch format. Adast and Omni-Adast has very little penetration into the North American press market especially at this price point. Adast is known for its cheap presses.
12. The recently launched class action suits are not launched frivolously anymore due to the actions of congress over the last few years. If you lose a class action suit the plaintiff can be assessed with costs under the new " Safe Harbor" provisions. This change has substantially reduced the number of class action suits and when one is launched, it usually has merit
13. Nobody is going to take over Presstek at current levels! The company, its patents and technology are not worth anything close to the $1 billion that its market cap indicates. Radically new technology from companies such as Man Roland, Scitex, Creo Products, Kodak, 3M, Polychrome and others will likely obsolete Presstek’s aging technology within 2 years. In fact if Presstek were to be put into play today, you would be hard pressed to find one legitimate buyer willing to pay even $50-100 million for the entire company. That folks works out to about $ 3.13-6.25 per share!
Yes I do own a few Puts, but who wouldn’t after the massive amount of time I’ve put into this project. In case you are wondering, my work background includes 20 years in the investment and corporate banking fields preceded by 5 years in the Paper and printing industry. |
