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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: Bruce L who wrote (11736)	1/24/1999 3:47:00 PM
From: Bruce L	Read Replies (2) \| Respond to of 42804

Question to the Thread: IF MRVC KNOWS NOW, AND KNEW SOME TIME AGO, THAT IT IS GOING TO SHOW A LOSS FOR Q4, SHOULD IT ALREADY HAVE PRE-ANNOUCNED WITH A PUBLIC WARNING? MRVC is as company that has not shown a quarterly loss(before special charges) in at least 8-9 years. Yet analysts are predicting a loss for Q4. Some posters on this and the YAHOO thread take it as a given. Other posters have spoken with company personnel and come away with negative tidbits such as 'we missed a product cycle.' No question the company has been "negatively candid" in private conversations with analysts and others and in the general field of PR has adopted a "low profile" which I have called a blanket of silence. Yet the "official" public pronouncements have been something else. As recently as the October annual meeting the company officially predicted a rise in Q4 revenue. At the Q3 CC the company acknowledged that gross margins on sales were down from historic levels but they WOULD BE back up in Q4. Maybe I have missed something that someone on this thread can point out, but as far as I know every official pronouncement from the company as it might relate to Q4 earnings has been positive. In other words, for the company to report a loss for Q4 would be a total surprise to every reasonably diligent shareholder who listened only to the company's official pronouncements. In August of 1998 the company "preannounced" because management came to feel that revenue for Q3 would fall short some 10-15% from what analysts were then predicting and from what the company had earlier suggested to us shareholders. (The irony has already been pointed out that in fact Q3 revenues came in only some 4.7% less than expected as opposed to the 10-15% predicted in the preannouncement.) Sector Investor gave us the best scenario I have seen as to how the preannouncement came about: in effect that they were panicked into it when Noam came back from an overseas trip to be presented with this information out of nowhere in an environment in which Mr Pink and others were alleging accounting irregularities. LEGAL BASIS, AND REQUIREMENTS FOR, "EARNINGS WARNINGS" I am not an expert in this field but this is my understanding: I believe there is a SEC requirement that companies publically make available to their shareholders on a reasonably prompt basis information they receive which has, or might have an material effect on the company's earnings. It is this together with the fear of class action derivative lawsuits on behalf of shareholders during specified time periods that prompts companies to make "earnings warnings." If I am wrong on any of this, somebody please correct me. My question is: Given that the above is true, shouldn't the company have already put out an earnings warning for Q4 if they were going to show a loss? In the last month or so, the stock has moved from a low of about 5 1/2 to ~8. Wouldn't all those shareholders who bought in the interim - including myself - be able to make out a pretty good case that in failing to warn the company has violated its fiduciary obligations and that we were thereby harmed? Bruce