SSPIF is not an internet stock. SSPIF is not a chip company. Spectrum doesn't sell communications software. Spectrum is an embedded DSP systems supplier. That's what the co. has been focussing on for the last 18 months. Unfortunately the stock market
just isn't valuing this sector highly right now (see SBSE, RSYS or BWSI for comparisons). But I do believe that will turn around. For example check out the November 30th issue of Business Week. There is an article on DSP entitled "Chips that Mimic the Human Senses". It's about TI and DSP chips, but analogies to the growth of the embedded systems segment can certainly be drawn. When Wall Street wakes up I feel Spectrum will get a better valuation. At 1x trailing sales there is room to move!
The current management team at Spectrum has shown it can make good decisions and execute. While it's troubling that the stock market doesn't get it, alot of Fortune 1000 customers do. Spectrum has been able to secure ongoing business with HP, Siemens, the DoD, Lockheed Martin, NEC, Motorola, Boeing etc.etc.
Three years ago the company made a decision to become independent of LSI {BWSI] and replace the entire product line with internal development. Then Spectrum beat all the competition to market with C6x. Then the company made a good acquisition in the SHARC area. Spectrum has even been able to maintain revenue growth (when others have been dropping). In the face of a large drop off in revenue from the older product lines, Spectrum was able to scale the operation to keep its commitment to return to profitability in the second half of the year. The company has done many things right. Yes, revenue growth is below the anticipated goal, but it will catch up. SSPIF achieved over 30% average annual growth in DSP systems revenue over the past 5 years. It's not uncommon that things would slow in a year like 1998 (see the Business Week article).
As Barry Jinks has said several times, we are about a quarter behind
where the co. thought we would be at the beginning of the year. Next year the growth engine will be c6x and SHARC. We will begin
to see several of our 38+ design-ins bear fruit.
Over the past two quarters Spectrum rationalized expenses, dropping about $2 million of expenses next year. So in addition to the plans to grow the top line, the company is managing the bottom line.
Spectrum is "a hot company in a hot market" and the company has stated
it is determined to raise shareholder value.
I share your frustration with the market cap of the company but I view this as a buying opportunity and am betting my money that the market cap will reflect the underlying intellectual assets and growth going forward as the company executes its plan.
Regards,
Norden |
