Hi Jon,
<Now whats holding this dude up? What would have happened if they had lost 78 cents, a rally? Are there any bulls who were not suprised by this loss? After seeing the earnings report are you holding, buying, selling or crying?>
Sold with pain buy no tears. Actually put in a short order at 11 1/16 but my broker screwed up the trade somehow (for about the sixth time in as many months) so I closed all my positions and told them to write me a check. Yep, I was as surprised by the loss as I was by the timing of the release (didn't sleep much last night).
I overlooked the possibility of 14 million in new leases. I saw the information in the 10K about 50+ million in leases for FY98, but it didn't cross my mind that it was "in addition to" not "instead of". That 14 million is going to be in there for the next 3 quarters. The jump in R&D was a nasty shock. They've been working on MR long enough that I didn't think they would have to throw that much money at it to play catch up. $75 million in sales vs. the expected $80 million wiped out another 30 cents. If it wasn't for the extra R&D and leases, it still would have come in at about -.40 before one time charges. If it had come in at -.40 and the company hadn't shot down the 20% estimated increase for Q2, the shorts would have been shoulder to shoulder at the door trying to get out. My guess is the opening gap would have been in the neighborhood of 5-6 points, with a move to $22 within days.
As it stands, the forward looking statements are terrifing, Q3 could bring book value to 4 bucks, with all debt and no cash. How are they going to get new design wins in the middle of a glut while playing catch up? They are going to need those extra 40 million shares to stay alive, and offering the extra shares will drop book even more. If they're still in business next summer I might load up again. The only bright spot is that the other operating costs are way down and should drop more when the plant in Ireland is closed. From the 10K the Malaysian loans are not currently hedged, so there are some paper profits out there someplace, but if the currency rebounds, they'll get clobbered at a time they can't afford clobbering.
The earnings announcement was made so quietly and unexpectedly that it's going to take a few days to sink in. The shorts were primed to cover before most of the longs knew it was time to get out of Dodge. I feel like a death row inmate that got a reprieve just as they reached for the switch. Shaken but still alive.
Regards,
Don |
