<< Q. Is FIBR a scam?
A. In a way, I wish it were. I've seen plenty of scam companies and the stocks of those companies usually get hyped to the moon before they deflate. >>
I see, so your investment advisor recommends investing in "scam" companies because he thinks they have better potential for hype appreciation?
<< $90 million for a company with $120 million in sales and 3 new networking products with explosive potential is absurdly cheap in comparison to other technology companies >>
The market is trying to tell you something. Companies don't trade at such "absurdly cheap" valuations without reason. The market awards low P/S ratios to companies that have little or no prospects for profit growth. I'll give you an example of two well known companies that have P/S of under 1. Apple and Zenith. Money losers for years now with even lower P/S ratios than Osicom. So don't give me this talk of Osicom's P/S being so low that it has to go higher and the stock is "cheap". If FIBR's stock wouldn't have plunged in the last few days it would have a P/S ratio almost twice as high as Zenith. Shows you just how "cheap" a company can go if it doesn't deliver.
<< By comparison, my long-time favorite scam stock has been developing a "breakthrough product" for the flat panel display industry for over 10 years. They have never had any real sales or had a profit. The stock was a big winner for many years and was almost worth $600 million a few years ago. It had a bad year in 1997 and is now worth only $200 million - over 2 times the value of FIBR! >>
I see, it's all relative! As long as FIBR is less of a scam with a smaller market cap, it should be purchased?? Sounds like your investment advisor is drawn towards companies who aren't profitable, yet have high market caps. Scary.
<< Q. Is FIBR hyped?
A. I don't think so. Management genuinely believed sales of the older product line would grow and be profitable last year. >>
So management's problem is not hype, but lack of foresight? Go ask your advisor why he thinks they are right this time after being wrong before. Why can he count on management's belief that they will execute this time when they didn't deliver on their promises before? You can't judge management on future actions that haven't occured yet. The only way to assess credbility of management is to look at what they have said in the past, and then see if it came true. If it didn't why extend them the benefit of the doubt a second time? Wouldn't it seem logical to NOT extend them the benefit of the doubt when they let you down before? Isn't it logical to think that companies that deliver time after time should be given the benefit of the doubt?
<< This did not happen (industry slowdown, consolidation of the company, and some management miscalculation), but it does not mean we were purposely misled. >>
So you are saying that management is not fraudulent, just incompetent? Inept? Those are certainly fine reasons you have there to give management the benefit of the doubt that this time it will be different.
<< Par Chadha bought 1 million shares around $10 per share over 1 year ago - pretty good evidence he believed good things were in store >>
I don't know this for a fact, but I will concede the issue to make my point. This shows that Mr. Chadha is TRULY incompetent! He runs the company and he didn't even know that his company was a poor investment?? I have never had it proprerly explained to me how the CEO of FIBR could be considered financially competent if he bought stock in his own company at inflated levels and then was forced to sell due to margin calls. Doesn't sound too bright to me. I want bright management running companies I invest in.
<< Management obviously remains very optimistic about the future of FIBR >>
OH REALLY? Then how come management was filing to sell shares late last year when Osicom was near it's lows???? If they thought the company was about to turn around rather quickly then why did they sell?
<< Q. Isn't FIBR just another in a long list of Witz/Chadha scam companies?
A. The Barry Witz connection is of some concern. If you read the Barrons article it appears that Chadha was brought in to manage two different Witz companies before embarking to remake FIBR into a networking company. Perhaps he learned that a high stock price can be used very effectively to raise capital. Perhaps FIBR was hyped and WAS a scam back when it hit nearly $20 per share in 1996 >>
I see. So it's ok with your investment advisor if management misleads the shareholders and hypes itself as long as it's a means to a glorius end? What about the people who bought in during the hype at inflated prices? Are they just expendable? Outrageous! I hope your investment advisor is free and doesn't charge you anything.
<< While the 1996 run in the stock does raise some questions, the CURRENT market value is not a scam. The current stock value is undervalued relative to the company assets and product set. >>
Just what does Osicom have in liquid assets that's worth so much? Worthless inventory? Accounts receivable? They sure don't seem to be able to hold on to any appreciable amount of cash. Companies like ASND, BAY, COMS, CS, (even SHVA) have had their problems, but they all had PLENTY OF CASH. That's what makes them attractive for turnaround candidates. Little cash, no respectable stock price, and no respectable corporate name = no incentives to attract top talent and no currency to acquire needed technology. Can you tell me what top engineers in the networking/telecom field have come and joined Osicom? I'm all ears. Successful companies like CIEN have engineers from companies like LU and ALA coming to work for them. FIBR has none as far as I know. This puts them at a severe disadvantage in trying to keep up with a CIEN. Limited cash means less money to spend on R&D.
<< Q. Isn't FIBR just a share generation and dilution machine?
A. The share dilution of the past year was mostly related to preferred stock (and the like), that was used in the acquisitions, now being converted to common stock. >>
Why do you think Osicom had to pay mostly cash for the bulk of their acquisitions? Could it be that people thought that their stock wasn't very strong currency? Obviously companies demanded cash from Osicom because they were afraid to accept their stock. Of course issuing stock through private placements can be quite profitable for the participants, so they could generate cash this way. Too bad doing private placements is a costly way to raise money and hurts shareholders. It is simply inefficient and costly to fund acquisitions this way.
<< Also, and this is a valid concern, since the company is low on cash they use stock to pay certain expenses (like the CEOs salary). That does tend to understate expenses and overstate profit, but it can be smart business at times and is somewhat necessary at the moment until the new products kick in >>
Kind of tricky isn't it? It does show up in the form of more shares outstanding which dilutes EPS so they don't get a total free ride. Hasn't Osicom had a bunch of "new products" which were already supposed to "kick in"? They never seem to kick in, and investors are constantly promised new products which will supplant the previous products which flopped. It's a never ending cycle of promises.
<< A. First of all, as stated above, I don't see much, if any evidence of past scams from the company >>
I do. I see a history of management engaging in the kind of offshore financing that is leered at by Wall St. Doesn't look like they will ever stop issuing shares. It's a way of life. Show me a company that Par Chadha or Barry Witz has been involved with (and there seem to be several) that has had a sustained run of profitability. Show me a publicly traded company that these two have been involved with that has had a successful stock price history. I see legal matters pop up with Osicom and people associated with it all the time. Barron's (via Dow Jones), myself and several other defendants in civil actions, Maryland Dept of Revenue tax liens, London Sunday Telegraph, Builders Warehouse class action suit, SEC indictments of people involved with an Osicom subsidiary, etc., etc. (This is just off the top of my head). Then you have articles written by Business Week with Osicom mentioned as a mob influenced stock, supposedly there was a negative WSJ article published a while ago, the Barron's piece, the London Sunday Telegraph article, etc., etc. You have Osicom saying that their lawyers won't allow them to comment on the NMS listing (haven't heard that excuse before). If they were denied they shouldn't have any problem stating that. If it is still pending they should be able to mention that. IF the NASD or SEC decided to investigate the company and it's business practices, I could see how their lawyers might not want to comment.
I suppose every single one of those articles have no basis in truth and it's just one giant conspiracy to gang up on a perfectly moral, upstanding, innovative, american success story. Yeah, right. I think I hear black helicopters circling above the house.
<< However, this is the key question:
Are these new products going to be significant revenue producers? >>
Wrong question. Obviously Osicom can generate $120 million in revenues. They have done that. The real question is whether or not Osicom can deliver net income faster than they issue shares. In other words can they deliver shareholder equity. They have been extremely poor on this front up until now.
<< Judging from the customers and distributors that this company has, there are undeniably some worthwhile products being sold. >>
Maybe worthwhile products for someone at the right price, but nothing worthwhile generated for you as a shareholder.
<< Based on comments from the respected "outside" Directors on the FIBR Board, this company has "turned the corner." >>
Names, dates and quotes would be helpful. Are any of these "outside directors" financially involved with Osicom in any way through stock, cash or any other benefits? If so, there you might find your answer.
<< Based on insider buying, the people that know the company better than I do think these products are going to sell >>
Sorry, another poor argument. If Par bought shares at $10 and it slid to $2 can we infer that shares bought at 3, 4, or 5 will soon fall to below a dollar? Sorry, but past insider buying is OBVIOUSLY not indicative of future stock performance. Nice try though. |
