Doc
Absolutely. I quess in my youth I should admit my own fallibility.
But I quess this is the beginning of wisdom. Your post is unbiased and couldn't be more right. Another young analyst said something to
me that struck me or you could say enlightened me. I am sure with the way the street and other market participants view IOM that KE new the consequences of coming in light. This anlayst asked me, "Why didn't IOM just pick a penny or two off the ground to meet their numbers worry about the hard stuff later". An unbiased market participant would think that noticing a slowdown in operations KE would cut back
SG & A, R&D, ect to come in line.
But upon further inflection, I realized that IOM did indeed put the brakes on mid stream but still could not make the numbers. In other words, IOM stretched the bottom line to get .13 hence taking away from
Q1. This is why KE sounded the bells about ad spending may impact earinings. What he should have said is we took some bottom line out of Q1 for Q4. Hence, your assumption of IOM coming in at .11 is right on.
Let's rewind a little to uncover some sort of distortion in KE's quidance to the street. IOM's third quarter CC took place on what October 22. During the CC KE was confident about sales, earnings, zip
growth, he even mentioned the retail backlog as being a "black hole".
No sign of Zips hitting a brick wall at retail, no Southeast Asian effects, no Jaz2 delays, no dramatic increase in SG & A, etc. Let me remind the participants that this is already into the Q4.
KE sells $10,000,000 worth of Stock in this same time period. Still no
pre-announcements, no warnings, no downward quidance. Now it's the Q4 CC and I've never seen such a dramatic reversal in perception in such a short time from a CEO ever. So, I am supposed to beleive that all of these problems Zip slowdown, SE Asia, Product delays etc all came to frution in about 6 weeks time frame. If the majority of participants truly believe this could happen, I have just quantified
the evolution of a boom bust sequence and how it can materialize!
As I brought up in a previous post, if KE and management can not bring these products out in a timely fashion, their credibilty would be in question. Well, it's now in question. Let's be unbias and ask how a
teetering tech like Syquest can offer a product (SparQ) in relative short time, with capacity and price being matched perfectly, and a billion dollar Co. like IOM that can even quantify to us whether their notebook drives are shipping in quantities, to retail?, who controls production? why aren't you pushing the notebooks?
IOM spent hundreds of millions of dollars on R & D where is it all going? These are questions that savy market participants want to hear answers to (Soros, Fidelity etc) With R & D spending like this we should see a holographic removable storage drive with capacity of 10GB.
I can't stress enough how bad KE and management handled this. If it wasn't for retail buying this stock would be at $4.
You have to wonder if KE is way over his head trying to manage a billion dollor CO. He needs to learn that in a large organization you have to hire smart savy people and give them their own businesses to run.
Lastly, He stuffed $10 million in his own pocket and took a $1 billion from ours
Steve |
