I suspect AVNT could report wonderful numbers for the quarter. Any
reasons other than the obvious why they shouldn't? Southeast Asia is
really booming, isn't it?
John,
Two recent articles from Dow Jones may be of interest. Here's the first:
NEW YORK -(Dow Jones)- Despite distractions caused by a nasty legal fight with a rival, Avant! Corp., which makes complex software used by chip designers, is comfortable with Wall Street estimates that it will have fourth-quarter net income of 34 cents a share, Chief Financial Officer John Huyett said.
Avant had a net loss of 11 cents a share in the year-ago quarter - though without extraordinary charges related to acquisitions, it would have shown earnings of 22 cents a share.
Most of the publicity Avant has received in the past two years has focused on industrial espionage litigation between it and its much larger chip-design-software rival, Cadence Design Systems Inc., which has accused Avant of stealing Cadence software code. In April, Avant's chief executive, Gerry Hsu, was hit with criminal charges of trade secrets theft by the Santa Clara County district attorney's office.
Avant and Hsu deny any wrongdoing. In the civil case, a court has ruled that Avant copied Cadence code in an older product, ArcCell - one that Avant stopped selling 18 months ago. The case continues, and the legal clouds have made Avant stock one of the more volatile tech issues. On Dec. 8, for example, it dropped 20% on developments in the civil case. But Huyett noted that despite the legal questions, the company is growing rapidly and said it is about to officially roll out a product that's a "potential blockbuster."
"Our performance has been outstanding," Huyett said. "That sometimes gets lost in all the noise" generated by the trade-secrets case. Huyett said the company also is comfortable with Wall Street estimates that fourth-quarter revenues will total about $40 million. In the year-ago fourth quarter, Avant had revenues of $28.8 million, and, after a $9.8 million pretax charge, showed a $2.8 million loss; without the charge, that loss would have been a $5.9 million profit.
The quarter caps a year of solid growth for Avant, though net income for the full year will be crimped by merger-related charges earlier in the year. Last year, the company earned $12.4 million, or 47 cents a share, on revenue of $106.1 million.
Based on Huyett's comments and Wall Street estimates, Avant's 1997 revenues should total more than $144 million. Huyett also said the company should get a boost starting next month from its new Apollo product, which is faster, more efficient and more flexible than its current offerings. "Our customers are excited about this product and we think it's going to be a hit," Huyett said.
He also said Avant believes it is now winning more than 50% of all new orders in the industry - quite a feat, given Cadence's size advantage. Cadence had revenues last year of $741.5 million. Avant has major clients in Asia and gets more than 20% of its business from Japan, where it has relationships with giants like Matsushita.
But Huyett said the turmoil in Asian economies "so far hasn't had any visible impact." Taiwan, which has several big chip makers that are Avant customers, remains "very strong" so far, he said.
Huyett acknowledged that the Cadence litigation remains a problem for the company. On Friday, a state judge, as expected, enjoined the sale of an old Avant product called ArcCell, which the company had already stopped selling.
The judge didn't enjoin the sale of a later-generation product, Aquarius, a major seller for Avant, although he didn't rule out doing so at a later date. He also agreed to let Cadence conduct discovery on additional code in both the Aquarius and Apollo products.
Huyett said there is no copied code in either its Aquarius or Apollo products. But he cautioned that whatever happens, the legal case won't be over for some time, and will continue to complicate life at Avant. "There's been a lot of uncertainty and doubt and we're anxious to get it over with, but in the meantime we're going to be focused on bringing our customers the best products in the business," Huyett said.
And here's a significant portion of a second story:
Avant! Filing Gives Short Sellers Ammo; Co. Backs Asia Move
By Anthony Palazzo
PASADENA, Calif. (Dow Jones)--Short sellers have honed in on a recent Avant! Corp. (AVNT) regulatory filing, saying it raises questions about Avant! Chief Financial Officer John Huyett's recent statements about the strength of Avant!'s revenue in Asia.
An Avant! spokesman categorically denied such speculation, saying "our revenues are 100% real."
In a Dec. 23 Securities and Exchange Commission filing, Avant! disclosed that it owns 35% of the Japanese distributor it formed in March, MainGate Electronics Inc., while Avant! Chairman and Chief Executive Gerald Hsu owns 40%. In the filing, Avant! said MainGate was formed to consolidate Avant!'s Japanese sales channel. The arrangement "optimizes (Avant!'s) competitive advantage in the Asian market to an extent that could not be achieved by using another distributor or directly selling into these markets," the company said. Equity incentives will allow Avant! to retain top local talent, it maintains.
Avant! has formed similar joint ventures in Korea and Taiwan, although the ownership details haven't been released.
Short sellers argue that Avant!, which is already under scrutiny on
allegations of stealing source code from rival Cadence Corp. (CDN), could potentially use the MainGate arrangement to inflate sales.
The combined 75% ownership stake gives Hsu and Avant! control over the distributor without having to carry MainGate on its books, they point out. As a result, Avant! could theoretically spruce up revenue in a flat quarter by having MainGate order some software licenses before it finds a Japanese end-user to buy the product.
The short sellers have no evidence that Avant! has done this, but they point out that Huyett, in a recent interview, said the turmoil in Asian economies "so far hasn't had any visible impact" on Avant! With other software companies such as Oracle Corp. (ORCL) and Adobe Systems Inc. (ADBE) - and Cadence, some analysts believe - feeling the pain, the shorts wonder how Avant!, with 20% of its sales in Japan, could escape.
"We do not do what the short sellers speculate," responded Avant! spokesman Matt Lifschultz. "Avant! does not book movement of inventory to its distributors." While he cannot state categorically that Avant! has never recognized any revenue from MainGate prior to MainGate's receipt of a customer's order, "if we have done that since we announced the formation of this joint venture, any such bookings would be insignificant," he said.
The company said in its filing that its results could be affected if
MainGate is not successful.
Huyett was on vacation and not available for comment, Lifschultz said. ... (snip) |
