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Technology Stocks : Vitesse Semiconductor
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To: OldAIMGuy who wrote (4634)7/12/2006 11:24:53 AM
From: JakeStraw  Read Replies (1) of 4710
 
"Vitesse was unable to announce Q1 results and the uncertainty surrounding the company made it impossible for it to seek traditional or even economical financing.

While the first symptom of these problems was a radical decline in Vitesse's stock price, it was the secondary issues that created a larger challenge. Unable to file a timely 10-Q with the SEC, Vitesse faced Nasdaq delisting and a primary lender claimed the company was in default of the loan provision that required timely filing of such reports. With a sub-$2.00 stock price and a dark cloud of uncertainty hanging over Vitesse, there was no realistic way for the company to raise the money it needed to stay in business without turning towards less conventional (more costly) avenues.

The net result of this is that Vitesse has now acquired the financing it needs to move forward. My bet is that Vitesse has used this money to pay off overdue debts and place a sizeable deposit with Taiwan Semiconductor (NYSE: TSM), Vitesse's wafer supplier. With TSMC running wide open, I'm confident the company has little patience with small customers that have questionable balance sheets.

From what I can tell, Vitesse has not lost traction with its major customers. This leaves me with the opinion that Vitesse will still provide the top-line growth I had expected for 2006. However, the problem is the financing package that saved Vitesse will absorb the vast majority of the profits I had anticipated falling to the bottom line. In addition to this, the construct of the financing package makes Vitesse a less attractive acquisition target..."
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