Those are very valid points, Charlie...born of long experience. And as always, we'll see how it plays out.
There are a few believable nuggets of information from this most informative of annual meetings that intrigue me and lighten up some of the jigsaw shadows - in the past they really didn't have all that much to talk about...this time they had plenty.
ADS.The tiniest of niche markets.Too tiny for leviathans to initiate price wars. Ampex is in fact the "industry standard" because competing products advertise "ampex compatible" equipment. Quoting Chriscraft's summary ( Bill could you second CC's take on this please?)
"This from C.Mckibben, ADS had been consistent and quiet up until now and we feel that with the new technologies,these Government entities will start to upgrade their systems in the near future. These systems are sold to our Government and many International Governments,it's is extremely difficult predict revenue numbers because these Government entities due things is spurts, small orders then very large orders all at once. But Ampex feel ADS will be in a strong upward direction shortly, why spin it off now when it will start generating nice revenues?
Ampex has a LOCK on this market because they have the best technology and the best value. Their product costs between 60-100K vs the next best competitor of 300k-500K with much inferior technology."
I hope Craig is correct. He probably is. Ampex really understands this market. It was once their primary cash cow.
Margins are high, and ADS is incredibly lean. A sharp jump in sales would mean a sharp jump in profits and would bolster their long run service and tape revenues.And that would not only supply some free cash flow; it would also substantially raise the worst case potential downsides of Ampex stock. Right place...right time...high margins.
Royalties. It is good to know that they are selling a flat rate for the basket. Use one or use all and you pay the same rate. The market will be looking for sustainable flows absent too much mystery...not lump sums.The market won't want to worry about how much the rates drop when a patent expires. And we already know international sales will boost payments beyond the thumbnail.The early lumps were , of course, for debt service. Once the market gets some rough sense of sustainable 2006 flow, then it can begin to price in potential growth from many other digital devices.
I am delighted to hear they gave one company a rate break in return with help in deciphering who might be using what patents. That ain't easy in these computer chip days. My guess is that company was Sanyo, but I don't know of course.
Execution. In the past Ampex has primarily executed shareholders more often than they have successfully executed their plan. That was a strong clue over the years that they were often somewhat unsure of what they were doing. This last year has been radically different. Absent Kodak, they mentioned they had locked up 80% of the digital still camera market. That is F@*&%(# PHENOMENAL execution. Truly astounding....especially given that they were initially dealing from a position of dire financial stress (that's why I didn't think they could do it - I was wrong). CLEARLY their negotiation techniques work. Their focus is superb. As the confusion continued for quite awhile, this newborn and chiseled precise aim should also continue. They know what they are doing in this evolution, and they have been doing it for a very long time.
As an aside.....Far from expert but I have taken a look at what other's have to say about Kodak's strategy and patent portfolio. Their key patents are incredibly broad and granted in this century. A patent critic I read thinks they are TOO broad....considers them indefensible. But they are taking a zero sum approach to negotiations with Sony, Ampex et all....their lawyers leading them around by their nose. I don't think that is gonna play in the long run, and their new CEO may come to realize it. I hope so. Despite the late date of judgement, Kodak is still risking quite a bit in the ITC case. Most companies don't want to derail their biggest seller. I think the odds still at least slightly favor a settlement, but if one is to come it will probably come on or near the last settlement conference on June 18th. ( I won't go into my paranoia about judges because it is probably most often unfair, and doesn't belong on a public message board)
My early hunch that Asian companies know and respect Ampex, its patents, and its style of negotiations...and do NOT respect Kodak ...continues. And I think they are VERY indirectly lining up to support Ampex. Nothing tangible to go on besides the remarkable number of deals they have managed thus far.....still just a hunch.
The stock price right now.
Charlie, I don't agree that this year's earnings are priced in at all. On a PE basis you gotta be kidding. ( it is probably 5 to 7). Due to the remaining, albeit drastically reduced, debt + legal expenses + pension service, this year's free cash flow is perhaps priced in. However, for once, the light at the end of this cash flow tunnel is probably not an oncoming train....all in all, this valuation is, in my opinion , very low. Despite the incredible rise, in terms of potential feverish valuation speculation....which may happen someday or may not...we ain't see nothing yet. In terms of sober investors and funds who may discover this stock...there is ample upside there too.
For all the reasons many have cited, the NASDAQ news is a big development. More radar screens, and now there is something to see.
Momentum is excellent at the moment.
Now I really never know where a stock is going in the short run, and you may have a handle on the trading pattern. If so , I hope it serves you well. It is true that while a negative ITC ruling would be far from fatal for the company, it WOULD hit the stock very hard for awhile....
but for once my instincts and the fundamentals and my sense of the high competence of the company's focus and strategy merge; and I believe it's up from here and soon. But as always, maybe the best strategy for anyone who wants to add to their long range position would be disciplined dollar cost averaging coupled with a little partial profit taking in those times when short term momentum breaks.
Hey it feels good not to waffle for once <g> .....
sorry for what was bound to be numerous high speed hunt n peck typos..no time to proofread
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