I do like greenberg. his past is not the best. i still remember his shorts and being a partner with some group in boston trying to break cree a few years ago. I do not trust this guy.
here is a yahoo post on greenberg article. I tend to go with ovti as a hold at the moment.
Re: new herb greenberg article out
by: flyingunderradar2
Long-Term Sentiment: Strong Buy 12/06/04 02:19 am
Msg: 126905 of 127003
This Greenberg article is even more baseless than the first one. I will pick apart his new arguments one by one.
Greenberg Point#1
"Many of the responses were along the lines that one reason investors have been bidding up Omnivision's stock is because it's cheap on a cash flow basis. (Since when are chip companies valued their cash flow? Ah, that's right, as I mentioned earlier you use whatever metrics work. Besides, as we all know, cash flow isn't always what it appears.)
My response follows. I am a CPA with nearly 20 years of experience.
Omnivision is fabless with very little in the way of capex requirements. Valuing OVTI based on cashflow is a valid approach because they have no need to pour their cash into fixed asset upgrades. TSM bears the brunt of this risk on Omnivision's behalf. Herb, did you ever hear of a little company names Qualcomm? They are also fabless. That is my response to bullshit argument #1.
Greenberg Point#2
"Others point to the company's cash generation last quarter, which on the surface looks impressive. But cash generation can always look good if you defer payments to suppliers or engage in other maneuverings. Notice that "other" current liabilities rose by $ 16 million. (You have to wonder what the "other" means.)
My response to Greenberg's point# 2:
Greenberg's use of "on the surface" in this point is extremely misleading. There is nothing on the surface about the impressiveness of OVTI in generating cash last quarter. Here is the evidence:
Cash and short - term investments rose by $ 66,117,000 from July 31, 2004 to October 31, 2004. Herb, I am sorry but there is nothing on the surface about that. During this same time frame accounts receivable rose by only $ 2,146,000 which indicates to me that the accounts receivable are of very high quality with NO BAD DEBTS OF ANY MATERIAL LEVEL hidden below. In addition, inventories actually fell by $ 14,003,000 from July 31, 2004 to October 31, 2004. Bottom line, the company did a fabulous job maneuvering through this product transition. Also if they are able to defer payments to suppliers more power to them. What do you think Walmart does? I also have a pretty good idea about what the $ 16 million is that Herb is getting such a hard-on over. It is probably accrued bonuses to employees who did one hell of a job in this transition quarter.
Greenberg point#3:
"Success in technology breeds competition, which for Omnivision is coming from the likes of Micron Technology."
My response:
Boy Herb, you really do not do a very good job of due diligence. Competition is a fact of life for all of us. But for you to pick Micron as the greatest source of competition for OVTI demonstrates how incredibly weak your case is. Micron is embroiled in controversy right now. There is a DOJ investigation into price - fixing for DRAM and Micron also has a large pending legal problem with Rambus that remains to be settled. Throw in the fact that Intel dumped nearly all of its holdings in Micron in the quarter ended September 30, 2004 there is no support for saying that Micron is strong competition for OVTI. MU's stock price is within $ 1 of its 52 week low. Herb, if everything was so rosy for Micron would this be the case?
Herb, I would like to engage you in an open debate on your critique of Omnivision. Name the time and the place and I will be there. My only requirement is that the transcription
of our debate will be published in your column the following day. I know you won't take me up on that challenge.
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