Thanks again for posting your take.
I think that if we can understand what might derive numbers like yours, we are better off as investors than if we pin our hopes on announcements that the Oracles of the world see video transmission as big, and therefore NUKO will get its share of money.
With this in mind I have a couple areas to quibble. First, NUKO actually lost quite a bit more money in Q1. This was due to cost of sales being much higher than you stated. BTW, going forward you stated cost of sales as 45%, but actually calculated 55%. On the face of it, this would provide a little breathing room. However, for the last three reported quarters, cost of sales were 85%, 117%, and 67%. Perhaps these figures were "abnormally" high because of manufacturing problems that have been addressed. Also, I recall economies of scale as production ramps up being mentioned as a remedy. Has production ramped up?
If, as you project for q2, recognized revenues are only $2M, than production has not ramped up yet, and cost of sales will likely be higher than you estimate. If this is the case, cash and credit reserves will be depleted dangerously. It doesn't matter if you're a great second half runner if you fall in the first half.
So, I am immediately most curious about your rationale for what I hope and think is a low estimate of q2 revenues. And what is the rationale for Q3 and Q4 ramping so dramatically? I hope you're right here, but we've heard these kinds of predictions before --- also always backloaded, heretofore never realized.
My own guess is that both revenues and costs will be higher in q2. The yardsticks I use are the following: the statement that $6 M represents break even; the rumors (not denied) that a $2M run rate are being realized; the statement that Nortel business is skewed by product and that Nortel business accounted for $3M in q4; and the guess that 50% of q1 deferred revenue will be recognized in q2.
My take is that q2 revenues will be about $5.5 M with a loss of between .05 and .15. Several numbers will be very interesting: gross profit margin, business with Nortel (if answered), amount of old revenue recognized and "new business" unrecognized. I also think that these numbers represent a stock neutral reporting, indicating that a second half ramp up may or may not be underway, and that NUKO may or may not have the resources and wherewithall to pull it off.
If Nortel business of $3M is started and booked in q2, then revenues could top $6.5 M and possibly a profit achieved. Short of a meaningful, credible announcement, this is the only scenario in which I see the stock sustaining a move over 4 or 4 1/2. This scenario would ease the cash crunch worries, and would supply credible evidence of greater stability (managerial and financial). Meanwhile, the market gets more ready for the products, and hopefully the products are recognized as superior solutions. (again, Peter, I'd love to hear your take on this last thought)
More thoughts anyone? |
