Some random thoughts for a Saturday morning.
Reading the raging bull simtek board has been more interesting lately because the level of personal attacks has significantly decreased and the discussion has turned more to speculation about what simtek will do in the absence of any real news from the company. It would seem that the mood on simtek is one of cautious optimism. The caution I think is good because of the issues that have caused a delay in the improvement in simtek's bottom line. While I am confident in the present management's ability to steer the company towards success, they have come up against some unforseen issues that have caused people to take their guidance with a grain of salt which I think is a wise thing to do. This is reflected in the present share price.
I also find the contest in guessing the quarterly numbers interesting. One thing that gives me some pause is TSB's guesstimate that numbers will be below guidance. Since he is the closest thing to an insider(since he probably knows the most people who work at simtek), is this (1) just a guess based on intuition (2) an attempt to balance some of the overly optimistic estimates that were made or (3) a real knowledge on the numbers from the quarter(especially since I seem to remember he started to float the idea that simtek might need an infusion of cash before the announcement from the company). Since I have added to my position over the past several weeks, I am betting on scenarios 1 and 2.
I also can see the quarterly/yearly numbers playing out in different ways. The scenario that I am betting on is that simtek is going to meet their guidance and will give guidance for good growth in the coming quarters. The first quarter of the calender year should not be a problem because it should be mostly over by the time the numbers are released. This should cause the most appreciation in share price in the short term. Simtek could also report numbers that just miss but give good guidance for the present quarter and future quarters and still do ok but that is more speculative since it would bring into question the accuracy of any guidance that simtek is giving(but again, for the first quarter of the calender year, it should not be a problem since it should be mostly over by the time simtek reports and there should be little mystery about the numbers by that time). I think TSB's guess for revenue falls into this category. I think the share price will do ok in the long term with this but short term will be more of a crap shoot since investors will question the guidance that simtek gives. The last scenario of a large miss is possible and would be most devastating to the share price unless simtek can say they will have a super large quarter and all problems are behind them. Although this scenario is possible, I find it unlikely because I would have thought that simtek would have released a statement about this already since it is materially significant information and simtek has done this in the past when this scenario has played out. The fact that none of the insiders appears to have sold recently as well as the fact that one of the people on the board bought his granddaughter some stock are signs that I am taking as positive. Therefore, I am speculating that things will be positive and we will see one of the first 2 scenarios played out.
I think we are all disappointed in what has happened with the share price over the past year, I know that I am. I feel, though, that a good part of this was beyond Simtek's control and is what happens with a small undercapitalized tech firm. There are going to be bumps in the road. There has been a call for more openness and more information. That would be nice. At the same time, some of the posts and posters have had a somewhat threatening legal tone as well as a lambasting of the company and its ceo(both professionally and personally) for giving inaccurate guidance. It is my opinion that these things are mutually exclusive. I am guessing that the present silence from the company is somewhat related to this. JMO though.
Lastly, there is significant risk associated with small companies who are undercapitalized. Money invested in simtek, IMO, is money that should not be missed if the company goes belly up. I also have a significant long position in the company so my outlook is speculatively positive. If I had the extremely negative opinion of the company and management that some appear to have, I am not sure that I would stay invested. But to each their own. That is what makes markets.
Any comments, corrections and criticisms are welcome.
Good luck, and remember, it is only money ;-).
Neal |
