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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (36704)	4/9/2002 11:32:04 PM
From: Johnny Canuck	Read Replies (2) \| Respond to of 67957

SONS, initial take on earnings: Guidance for next Q flat on rev and gross margin. Op ex to be down 2 percent due to cost cutting. Still seeing trial activities. Have seen a positive conclusion to some of the trials (ie... expect order when and if carriers start to order). They have kept R&D at previous levels, which is good for the future. Short term though that means R&D was 69 percent of rev this Q vers 33 percent last year. Sales and marketing expenses are also flat. This indicates they are not cutting back in the areas that matter most which is research for new products and selling which will get them next customers. 2 new customers in the Q. It looks like they are not losing share as a result. G&A down about 30 percent Y-Y. Management is doing their part to control cost. On the surface I would have said they can not cut more, but the 10 percent salary cut is interesting. It indicate management believes in the company and will do what it takes to survive. It also indicates that they don't expect a recovery soon and they are not concerned with lossing staff. So the market must be slow for everyone from their perspective. Gross margin was 47 percent. I don't know of a tech company that can survive with a GM less that 50 percent. The 2 percent reduction in Op Ex will help. 109 mil in cash less long term debt and accounts payables equal 78.4 mil. Share out 186.057 mil. That give SONS a cash value of 42 cents a share. Current burn rate is 24.5 mil per Q. Assuming 10 percent reduction that leaves 22.05 mil per Q. That is about 3 Q of cash they have. It means they need to go back to the market soon. That call is positive only of you believe the market will re-bound in the next 3 Q's. That means they needs a re-bound by the September Q. At this point this is still in doubt. This is a high risk play, suitable only for trading at this point. Their long term survival is still at issue.