To: David G. who wrote (196 ) 12/16/1997 6:16:00 PM From: Jeff Tribble Read Replies (2) | Respond to
Brightpoint is always issuing press releases claiming to be the sole distibutor of various manufacturers and it's all BS. They claim to be the sole distributors for ERICY and NOK.A, etc, yet Cellstar is a distributor of both of those products and does over twice the volume as CELL. I'm sure their claims to be the sole distributor of Iridium handsets is just as much BS. Cellstar reminds me alot of DELL a couple of years back, they were growing at twice the rate of everyone else in their industry and this rapid growth caused them to stumble a few times with embarrassing mistakes (currency futures contracts, laptop fiasco, inventory charges, etc.). But Dell learned from his mistakes, corrected the problems, brought in Meredith, continued to grow at twice the industry rate and the rest is history. Bottom line, Cellstar has come from basically nowhere to a runrate of over $1.5bil in revenues in less than a decade, this rapid growth has caused them to make a few mistakes along the way (as happens with every company that grows that fast, check INTC 1 decade back). They have made many changes in their business plan the past year that were very prudent, mainly exiting the high margin/high SG&A retail business and increasing focus on the low margin/low SG&A wholesale business. Revenues and operating profits have exploded. There is currently less risk in their business than 1 year ago relating to receivables and inventory and their break-even level of sales is at a very comfortable level. I find it humorous that the fuel behind the shorts story (lower allowance for doubtfull accounts, lower margins, lower SG&A, while revenues and profits soar higher) are actually the result of a sound change in the business plan. They have also indexed their pricing and receivables in foriegn countries to the US$ which takes most of the currency risk out of their business. The problem for us longs the past month and a half is the same problem that faced my fellow DELL longs a couple of years ago (I think we came out pretty good), the short story is very easy to tell.... just look what happened last time..... Micheal Dell is an idiot unqualified to run a company this size...... the direct channel won't work......Cellstar is cooking their books......Al Goldfield is a liar....last time latin america had economic problems CLST took big charges.....etc. The problem with all these easy to believe stories are that they fail to take into account changes in the business plan of the company in question that addressed past problems encountered.
