Good analysis, Jacob, but unduly harsh in contention 2 and 4.
I doubt that a debt-based buyback of shares is going to happen, but I would agree that the CEO's answer was not reassuring or conservative.
The dividend rate of nearly 7% is out of line with their peer group and does imply an excessive payout ratio in the immediate future as expected earnings are constrained by the recession. I expect the board to review this situation as warranted. I guess their current $4/share cash cushion and zero debt position gives them some breathing room for now to maintain what seems like a rather generous dividend.
Problem with dividend cuts is that they signal to investors a lack of confidence by management, which results in a vicious cycle of further share price erosion. By maintaining the dividend they signal to investors that they expect earnings to recover.
Tech companies like MXIM with zero debt, billions in cash sitting in the bank, and the ability to make money, albeit at a reduced rate, in one of the worst recessions in the last 60 years are probably not a bad place for investors to put their money, especially if the dividend makes it worth the wait, unless the management are crooks.
So it all comes down to your contentions regarding their corporate governance:
2. The BOD are thieves.
3. The CEO is irresponsible.
4. Their SEC filings can't be trusted.
These are pretty serious charges which I do not think you have sufficiently substantiated. [Without wishing to stifle your freedom of expression or pursuit of the truth and investor justice, I would humbly suggest that you dial down the rhetoric a bit and remind you that you are publishing in a public forum where libel and other laws still apply.] You seem to base your allegations mainly on the recent options grant improprieties plus the CEO's comments on the debt-based buyback. But stock options are the lifeblood of Silicon Valley and, without excusing their behavior, they certainly had a lot of company from Apple on down the food chain. MXIM suffered much more heavily than most companies that committed similar improprieties, resulting in CEO's departure, extensive restatements and exchange delisting for a considerable period of time. All this has already severely pummeled the share price, which today sits at 10 year lows.
I tend to regard Maxim as a company that represents more of what is positive about America than what is negative. I see a company with a 25 year record of innovation extending the benefits of Moore's law way beyond the computer or consumer electronic segment, reducing power consumption, manufacturing and exporting chips with very low ASPs, creating thousands of good paying jobs in America and around the world, etc. While I sympathize with your emotions, I feel that your bile is misdirected in this particular case, and that you have been a bit harsh in your conclusions about MXIM's corporate governance.
Sam |
