Christine:
>>Honestly, what do you think SPTR's chances for
>>recovery are, if one is patient?
The good ...
Some real solid value players with super long
term records in the business has taken a large
stake in the 8-10 range and may have added
with this downturn. One of them is Marty
Whitman, a one of the best there is on Wall
Street, in the value game. There are others
as well. Check out the 13G filings. I watched
the volume carefully the day the stock tanked.
I don't get the sense that these guys bailed
out, at least not all of them. Keep in mind
the stock is now selling below replacement value,
which is what the value "vultures" go after.
But they are patient, and their patience can
last even 3-4 yrs. So, the hot money has moved
on and your downside may be limited here.
If you got in at say even 8, and at the end
of 3 years SPTR has turned around and the
market has been kind and the stock moves to
40, then you have a 300% return over a 3
yr period, with little downside. A super deal
which will attract the super value players
like Marty Whitman and Wellesley Mgmt. You
need a lot of patience to hang with the value
types. But you can also be rewarded handsomely.
I do not see SPTR falling off the face of the
earth and filing Ch 11 anytime soon.
not so good ...
I do not expect the stock to go anywhere till
they have shown returns on all the investments
in plant and equipment that they have made.
Back it up with at least 3-4 quarters of
accelerating sales and earnings. This is
not the first time that SPTR has turned around,
and have the street take them seriously and then
get burned. This has happened at least 2 times
in the last 5 years. They have left a lot of
bitter taste in the mouths of the few (2 or 3)
analysts that cover them. The other scenario
would be a rising tide lifting all boats
situation. Let us say, that investors decide
they have had enough of MSFT, DELL, INTC, LU, CSCO
and all the other big-cap names and want to move
into more value-oriented segments of the market
and undervalued small-caps come into vogue, then
I can see SPTR move up with the rising tide. Also,
asia where they do a lot of their international sales
(25% of total sales) could turn around and help
SPTR increase sales. One of their biggest problems
is they have added all this extra capacity and have
significantly increased their fixed operating
overhead but have nobody to sell their products
to. Also, GLW and LU have come out with advanced
single-mode fiber that does WDM and DWDM that
SPTR has no answers to. Keep in mind most of the
new capacity they added was for single-mode.
So, next 3-4 quarters the prognosis is in my
opinion not good. So, not only are company
specific fundamentals going against SPTR,
but also macro conditions that SPTR has little
control over and you cannot hold mgmt fully
accountable for these conditions. Such as, falling
prices, Asia, small-caps being out-of-favor, etc.
Their backlog has fallen quite significantly, this
does not bode well for a company that whose business
model is weighted towards term contracts.
Also, I find the management not
particularly investor-friendly to the point of
being arrogant. SPTR is run by a bunch of techies,
that have tried their hand at running a business for
over 15 yrs now. Let the results speak for themselves.
Till this continues SPTR may need all the help it can
get. My biggest fear is that SPTR may be forever
relegated to feed of the crumbs that fall of the
GLW-LUCENT-ALCATEL table. Smart businessmen, given
the length of time that the people running SPTR
have had, would have done something about this.
The management changes there do not impress me nor
do they convince me that the status quo is going to
change.
Also, SPTR is now saddled with quite a bit of debt
which does not help unless they can prove that they
have put the debt and equity financing to good use.
If you want to play the fiber optic game, then on a
relative basis I consider GLW as a better play than
SPTR. When the macro conditions I indicated above
start turning around, I believe that GLW will move
a lot faster than SPTR. So, it may not be a bad idea
to evaluate if selling SPTR & taking losses but moving
into GLW for the long-haul. This way you are getting
into GLW at close to 52-wk lows and still are in the
fiber-optic game. GLW is mid-cap and has a lot more
institutional interest than SPTR and lot more analysts
following it.
If the reasons you purchased SPTR in the first place
have changed, then I would re-assess SPTR as a holding.
I would look at SPTR in light of what you know today,
I mean facts not rumors or on-line prattle.
as usual pardon any errors in form or diction .... |
