richard and peacelover,
frustrating as it is, i'm still holding mrvc. it's really hard
to keep a loser with Dell and Apple reaching new highs.
moreover, a lot of stocks came down during the recent correction.
i admit i've sold some mrvc for some of the other stocks.
this was not a rational move, but a human move -- i just ran out of some patience on this one. i still have mrvc, and i will be investing more in it for sure. i remember CMGI didn't move for what seemed like the longest time(turns out to be only 10 months but it felt longer), and it took less than 6 months to go from 20 to 180 (presplit). (but yes, i wish i can time the market)
as for the accounting charges, i think it's pretty much dead horse.
it's sorta like an unprovable case. i've stated my points and pink has. and the truth is unprovable (unless we go over there and do our thorough investigation) and more arguments is just a waste of bandwidth ... we'll have to see. but specifically,
1. the question of negative retained earnings despite 32 q. of
earnings ....
well, a lot of high-growth high tech companies go through rapid
growth periods. prior to the xyplex acquisition and even after fibronics (around aug. 1997), retained earnings of mrvc was something like 15 million. so, it is not as negative as how pink phrased it. And i still think they got xyplex cheaply.
mind you, this stock is a high-risk stock. it is a tech stock
after all. but i really don't think that the accounting of mrvc is more aggressive than compaq (whose charges for digital was exactly the
same as xyplex, if you use per employee count), cisco or lucent. in
fact lucent's recent charge of around 60 million for a company they
bought for 100 million (forgot the name) would seem big too.
again, as i said, even if you assume all charges were phony,
how do you explain the increase in sales from 165 to something like
265 million this year? it's hard to fake the revenues. Okay, even if you assume they are faking it and you subtract the entire xyplex acquition of 53 million from 265 million, it would still be 210 million, still 30 percent over last year. i know, i know, it's not a clear answer but it never will be. (if it were clear, there would be no arguments) and some people try to separate xyplex sales vs. mrvc, but that is the point of acquisitions.
i personally like companies that grow using their cash flow. but
in the case of xyplex, it was a case of "better to buy than to build
your own".
but let's call a spade a spade. the networking industry is very,
very competitive right now. so mrvc's success is not guaranteed.
but i think they are making all the right moves(WDM,carrier) and their expertise in fiber optics and more future-oriented networking technologies should help them. (aside from hewlett packard and lucent, no one else, not even cisco, has a laser foundry like mrvc) anyhow, mrvc should at least be worth double or triple their current 500 million market cap soon, or 600 million market cap if you count share dilution.
so i am waiting for the DWDM and carrier type products .... we'll
see.
again, there's not much else to say, so i'm not going to post
as often as i did. i doubt it offers much of a help anyway. at least not to the market which slammed me in the face .... humans
have infinite capability to rationalize .... there's nothing else to do but to wait which is intellectually easy to do, but humanly hard to do ... and in my case, even if i got a little bit impatient and sold some, i still own a lot of shares, and would be adding from time to time.
in summary, i believe there is enough margin of safety at this
price that MRVC can make some more mistakes and stock won't go down
further. on the other hand, a little upside news (e.g. cash flow
becomes positive this quarter, an announcement here or there) and
stock can move up quickly...
one more note, my investment in MRVC has a subjective component.
it is based upon meeting the management, and the plant. just as
no one can explain how you like someone, i can't explain why i
like MRVC.
and the future value of 100 million dollars (the convertible) in networking extrapolated for three years can easily be 500 million ... so,despite all the possible negatives that the shorts suggest,
the margin of safety is there. if MRVC were trading at 50, then
obviously there is no margin of safety. but it is 18. Dell fell to
less than a dollar ($15 pre-split)in 1994, when PC notebook problems and "accounting issues" troubled Dell then. But again the fact that
Dell and MRVC have the same set of problems does NOT mean MRVC will
someday become a huge winner like Dell too. All i am saying is that
high-tech stockpicking will never be as clear as picking
a Coca-cola where cash flows can be discounted ten years out .... |
