I'm a new investor in this company and I thought that people who read this board might be interested in a short synopsis of the company that I wrote.
Amazing! That's the only way one can describe SEVL's stock price. Here is a high tech company selling for less than book value with around .80 per share in cash. In other words, the company is selling for about 2X cash and less than book. This apparently has not gone unnoticed since one of the top value investors, I've been told, holds 300,000 or so shares.
So how did the shares get so cheap? Well, for one thing the company has been mismanaged, as I'm sure you're all aware, for years. Great product. Terrible business sense. Delayed shipping, wasted advertising, cost overruns, you name it. Then to top that off new management took over and George Grayson, the former Chairman and CEO, who held 11% of the company, sold 1/3 of his holdings or about 400,000 shares, if I'm not mistaken. That apparently was the last straw for the market, and down the shares went. So instead of the stock getting a boost up with the announcement of new management, it got a kick in the pants.
In July the company is to send out a proxy statement which details the compensation package which the new Chairman of the Board, Donald Schupak will receive. My understanding is that his compensation package will largely consist of equity in the company, which will certainly give him incentive to try and boost shareholder value.
With the price of the stock selling for less than book value, the buyer gets the technology essentially for free. Not only that the company has some very interesting irons in the fire. The company is slated to release 4 Barney games (remember the talking doll?) this year that they are developing for Microsoft. As I understand it the games can either stand alone or be used to enable a child to interact with both a computer (or TV) and the Barney doll. (The Barney doll can also be used as a stand alone item. In its stripped down form, I believe it has a vocabulary of about 2000 words.) The deal seems a good one for SEVL. Microsoft, as I understand it, is picking up the development and marketing costs. SEVL will get 10-15% of the royalties.
In addition the company is to release Raymond E. Feist's "Return to Krondor." The original game, correct me if I'm wrong, was a big success. They also are slated to release Dominion, which sounds to me like an also ran city-building game, and Helicops, about which I know nothing. They are also going to release another Monty Python game. Lastly, Sony recently released True 3D technology from PyroTechnix, a subsidiary of 7th Level.
Big question is will these upcoming releases turn the company around so that it will be profitable? The most the company will say is that by the end of the year they hope to be in profitable businesses. They are also attempting to cut expenses. Clearly, to make a go of it, However, they will need to build some franchises. Krondor and Python are probably good beginnings, but remember that they are in a high competition business, where there is a ferocious fight for shelf space. It's unclear what more will come of the arraingement with Microsoft. Possibly some good sales for now. But remember the Barney doll is pricey. I'm told it will retail for $100 to $150. And after the Barney deal? Who knows? Microsoft is notorious for partnering, learning the new skills and then dropping out of the partnership. But with a peanut size market cap, maybe Microsoft would just swallow SEVL whole.
Well, that's the story as I see it. My summary was based on a telephone call to the company, recent press releases and the company's latest 10Q I can't guarantee it to be correct. Do your own due dilligence before buying the stock if you don't already own it.
Disclosure: the author holds what for him is a significant position in the company. [end of report]
If anyone has any comments, corrections, amplifications, I'd like to hear from you.
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