IS/ALL: You tell me, is Schilit is to be trusted?
Is he being careful and fair or is it just another potential for abuse?
Hey, I'm all for independent reports but whose to say he is not glossing over the findings or in bed with a large shorting group. Maybe just trying to make a quick name for himself. I bet shorters love him, especially if he is not forced to follow Reg FD.
Did he unfairly damage ESST's shareholders by not getting the company's side? Even a lame reporter will generally do that, and our system of justice is based on it. Why not get a company's response and let us decide what we believe, right?
You tell me after reading this. It sounds like Mr. Schilit inadvertently and unfairly cost shareholders a lot of money. He could at least have included the response from the company he is reporting on.
ESST's PUBLIC RESPONSE VIA A PRESS RELEASE:
Mr. Blair continued, "Separately, we are aware of a report recently issued by the Center for Financial Research and Analysis, Inc. (CFRA) which is extremely misleading. The report implies that ESS may be hiding expenses to inflate its operating profits by having its former subsidiary, Vialta, Inc., pay for these expenses. This is absolutely false. ESS spun off Vialta to ESS's shareholders in August 2001 so that investors of either company would have more visibility into the business and finances of both companies and the two companies have been operated as separate independent public companies since that time. Prior to the spin-off, ESS provided various R&D and administrative services for Vialta. This information is shown in the enclosed table and has been reported in our respective 10Ks and 10Qs. As you can see from the table, the primary expense paid by Vialta to ESS since the fourth quarter of 2001 is for the lease of one of ESS's buildings at market rates. To imply anything improper is being done is false, misleading, and a disservice to both ESS's and Vialta's shareholders and employees."
Mr. Blair added, "Additionally, the CFRA report goes on to 'raise concern' about our Hong Kong distributor handling over 50% of ESS's revenues, and the potential of 'an impaired relationship with such a major customer.' This distributor, Dynax Electronics, is located in Hong Kong and has been ESS's distributor since 1995. Dynax handles the product delivery and letter of credit collection processes for ESS's customers in Hong Kong and China and is paid a 1%-3% fee for these services. Sales and support for these Hong Kong and China customers are handled directly by ESS and include the following ESS customers: ChangHong, Desay, Jiangkui, Skyworth, TCL, Tonic and others. Dynax is not considered an ESS customer and ESS recognizes no revenue for shipments until Dynax delivers the products to ESS's customers. Once again, the CFRA report is misleading."
Mr. Blair concluded, "ESS is a solid company with a strong balance sheet and the leading position in the fast-growing digital video market worldwide. We believe our strategy of becoming the leading consumer digital entertainment supplier is working. We are comfortable with the revenue and earnings guidance given at our last conference call, and as we stated at that time, we expect to continue to grow our DVD shipments 10%-20% each quarter for the coming two quarters. We believe our market position, our strong technology, and the new products scheduled for introduction during the coming year will enable our company to continue to be a leading player in the growing consumer digital entertainment market. We believe the implications in the CFRA report are highly misleading, inappropriate, and a disservice to our shareholders, employees, and customers."
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I tend to agree and apparently so did many because the stock climbed about 4+ points after the report over the next day or two. All it did was make money for shorts and then those who went long. As for those that panicked, not knowing why the stock was dropping, well, they lost a lot of money. |
