I am afraid I have to agree with Raefon.
The company should be sold to someone who can manage it. The most recent conference call...held just over a month ago...held no indication of pricing problems or concerns about meeting the 25%+ revenue growth expected for the year.
Either management was not honest...preferring to discuss design wins and new potential customers...or it got monumentally blindsided. Honestly, I don't know what is worse. One thing I know for sure, however, in the last month there has been no significant movement in the foreign exchange relationships of the Japanese, Korean, and U.S. currencies. Thus, it is somewhat farfetched to believe that the company is being entirely straightforward in blaming Far Eastern problems for this quarter's results.
Moreover, it is my understanding that Motorola arranged for a 10% price reduction from TFS recently. However, if you assume that MOT would represent about 50% of TFS's total business, and the current quarter "should" have had revenues of about $30 million, MOT's portion would have been about $15 million. Thus, a 10% cut in pricing should have cost TFS about $1.5 million in revenue.
That would have been significant, of course, as it comes directly off the bottom line, and on an after tax basis would have cost shareholders about $.11 in income during the period.
However, it is apparent that the current quarter is going to end up somewhere around $23 million or so, indicating that the revenue shortfall exceeded the MOT pricing change by at least another $5 million.
Anyway, the company is now in the process of bringing on new production capacity which will be filled with business at unsatisfactory pricing levels. For me, this brings the entire investment into question, as it isn't clear that there will be an adequate rate of return on the new business.
The company has a different profile now, and its fixed costs are higher and will continue further in that direction when the new permanent facility is completed in China.
Bottom line...Raefon is right. They can't manage it. Even when they do, they can't communicate it.
Too bad. In retrospect, the only time in the last half dozen years this company has done well they were in the fortunate position of being in front of the curve of MOT's large upswing in cell phones. Since then, they haven't done all that much right.
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