All,
VLSI is not going to make a public announcement that Rich Beyer and Larry Grant are leaving the company. Instead, they chose to send an internal email to employees notifying them that Rich left. I got this information from Sunil Mehta, VLSI Vice President and Treasurer. According to Sunil, both left for personal reasons. I also asked Sunil if other news was forthcoming that could explain the market's reaction today and he said no.
I don't understand why the market reacted so negatively to this news, but there was some serious damage done to the chart today. I would expect resistance near the old 52 week low at 14 5/8. The stock has support on the weekly chart between 12 1/2 and 13 1/2 and I think it's really important that it stabilize and not take out today's low. What we saw today was a panic, partly because people didn't know why the stock was dropping, and partly because those who did know didn't like the news. Oftentimes, a panic of this nature indicates a bottom, especially when the news doesn't seem to justify the reaction.
According to Sunil, the company is comfortable with Q3 estimates of $145 to $150 million in revenue and earnings per share of about 15 cents. While not spectacular, this would show sequential revenue and earnings growth and is a move in the right direction. Let's face it, with a book value near $12, $340 million ($7.18 per share) in cash and securities on the balance sheet, and an earnings estimate of $1.02 for next FY, the stock is dirt cheap at 14. However, it never ceases to amaze me how low a stock can go, even when it is already trading at a reasonable valuation. The reason: people do not think rationally when they are panicking and what we saw today was a panic. |
