>Kirk if your listening, take BCS public<
I think Mandy is playing the cards right, and knows he has to wait for the right time to sell BCS. He is caught in a quandry this quarter. BCS sales were soft due to factors in the industry beyond management's control. To appease the analysts (who have been clamouring for him to get rid of BCS) he had to come up with the announcement that BCS will be segregated into a distinct entity. This gives him time for BCS to pick up.
Last quarter, Mandy commented ..."why should I sell BCS when it is a growth sector." So I think, he believes in his heart that the the truth is, BCS will be a growth sector. Companies need to upgrade and modernize their telephone systems all the time. Mitel has a strong and respected niche supplying phone systems to medium size corporations and institutions. Its products are world class quality.... and money can be made in this business. Unfortunately, the sector is soft due to businesses uncertain about upgrading their phone systems when there is so much buzz about Internet telephony. Mandy did mention in the conference call that Mitel has upgrade plans that will comfort customers that if they buy the systems now, they could upgrade to IP solutions at favourable prices.... so buying now won't mean buying obsolete systems.
So, here is his dilemma.... he knows it is only a question of time before BCS becomes a growth sector due to emergence of VOIP and Internet telephony. Meanwhile sales are soft world wide, and the pack of self serving wolves (read analysts) are at his door howling and nashing their fangs. Analysts always want to appear smart, so they come up with conceptual opinions to solve any operational issue, no matter that non of them have ever run a phone systems company before. So in order to buy time, and hold the wolves at bay, Mandy and BOD had to make the announcement of starting to spin off BCS.
Did you read an analyst/money manager quoted in the National Post (weekend edition) that he doesn't think any company would want to buy BCS !!! ROFLMAO !!!! If I were a client of his fund, I would take my money and run ... pronto!
I've been following Mitel for years, buying in and out various times. I've studied its history, and observed how investors will very quickly under-rate the company, causing the stock price to be very volatile. It is an extreme love/hate relationship. Lots of critics around whenever BCS is soft literally proclaiming that the end of world in nigh for the company. The record shows that most of them have been proven wrong. Invariably, the sector picks up, and becomes very profitable, and with it, the stock price:
In Dec/91 the stock fell to $.80 because of slow PBX sales, only to rise to $11.25 in 1992 when the company had large sales in China.
In Jan 97, the stock went to a low of $5.50 again because of concerns of slow sales, only to reach a high of $24 in March 1998.
In Jul 1998, it purchased Plessey, and issued 8 million stock at $21.30. Analysts were head over heels in love with the acquisition (could it be because they got a free trip to England?) and wrote glowing reports recommending investors buy the stock. The stock fell to $8 in May 99 due to impact on earnings from the Plessey integration.
Then of course, we all know the story of Spring this year. Internet mania, semi-conductor mania, Blue Tooth excitement, VOIP excitement, whipped to a lather by both analysts and investors, pushing the stock price to a love-in height of $46.
As recently in September, the stock was around $36. Today, it's $17. What has changed? The Q2 report, and Mandy reporting that BCS, while profitable, is still suffering from poor sales. Oh WOW! This is unbearable!! It's the end of the world for this company!!! BCS is not worth a penny!!!! DUMP! DUMP! DUMP!
I would like to take an opposite business point of view to the analysts. I think Mitel should buy Nortel's telephone systems business, and then spin the whole BCS division. After all, if the BCS sector isn't worth a penny, why not take advantage and buy out your biggest competitor's BCS business? I would guess that Nortel will only be too pleased to get rid of its phone systems business to concentrate on optical networks (imo a growth business now, but a slump over supply business within 3 years). Pay a penny to aquire Nortel's PBX non-growth business, re-structure, pay the underwriters a fat fee to issue new shares, obviously to earn the underwriting fees, their analysts would pontificate, in profoundly complex reports, a rosy outlook and tremendous prospects on this "Clarica" type of business model. Their reports lend assurance to the full service brokers that it is safe to recommend the stock to their servitude, but wealthly, clients at $20 a piece!
Mitel management get rich, underwriters get rich, analysts get rich, brokers get rich, investors who buy now get rich, and the full service clients get what they want... a buy&hold stock.
Win, win, win, win, win, win ... all around! |
