I think folks are selling ACT and buying CMC to
capture the (rapidly shrinking) price difference.
Yes, they need customers. This is where their focus
will be. CMC recently lost their 1st and 3rd largest
customers... hence the recent drop in revenue (and
the reason ACT could buy them)... this from CMC's 10K:
> The Company's four largest customers in fiscal 1998 and their
>respective percentages of CMC's net sales for 1998 and 1997, respectively, were
>as follows: Micron Electronics ("Micron"), 24% and 21%; RELTEC, 12% and 11%;
>Global Village Communications ("Global Village"), 11% and 14% and Diamond, 9%
>and 2%. The Company is currently recognizing revenues from Diamond at an
>annualized rate of approximately $50 million, which is less than originally
>expected. During the past 18 months, the Company initiated business with a
>number of new customers, including Premisys, Midway and Next Level. As
>previously disclosed, the Company's manufacturing relationship with Micron was
>discontinued at the end of the second quarter of fiscal 1998. Following Global
>Village's sale of its modem business to Boca Research, Inc. ("Boca") in June
>1998, manufacturing of products for Boca has declined to minimal levels.
But recall that, during the last conference call, ACT hinted they
have a big deal brewing with Motorola and they expect to cinch the
deal within a few days.
exchange2000.com
Still, I'm not looking for an overnight turnaround in their
stock price. What I do expect is that they will swiftly
integrate the two companies and then focus their full
attention on winning new business. Having bulked up, its
far more likely that they can compete effectively with
larger EMS companies, winning new customers and expanding
their business with existing customers.
Rob
PS) In reference to the 1M shares of preferred stock that CMC holds in Cortelco,
the most recent 10Q for CMC states that CMC "has the right to require that
the Preferred Stock be redeemed by Cortelco beginning on August 1, 1999 in
five annual installments of $2.5 million each." |
