Think you are right. An inventory write-off that size didn't just pop up in the last quarter. Had to have hung on until they couldn't hide it anymore. What assurances are there these types of managerial and operational deficiencies are corrected? Inventory mismanagement at that level is never a singular problem. Indicative of other underlying management issues that are easier to mask or simply not address.....for a while. It's been two years since new management took the helm and the results are not much better than the previous in a better market. Ship can't be righted as fast as the executives want the stockholders to believe even if this team could manage to figure out how. Guessing, and it's strictly a guess, 3rd and 4th quarters continue the trend and show another significant set of losses.
But if its a POS why would anyone want it? I have serious doubts about this one. Huge competitors in LED and they seem to be late on the draw on major issues like last quarter's inventory writeoff, solar and the dispute with the former CEO. Where there is smoke there's fire.
Ariel is a deep value investment fund. - They have continued to add to their position in OESX. - They are at a point now where they should have directors on the board. It is not their habit to operate companies.... However - They are so far in as a percentage of ownership that should they decide that they want out they would have a very difficult time unloading their shares. The only way they could do that without disrupting the market in a major negative fashion would be to sell out to a "White Knight" takeover player. (either a financial investor who would later "flip" the company - or to a strategic buyer who would look to absorb/ merge OSEX into their organization.
It the best pure play I have found to take advantage of the LED trend. What is disconcerting to me is the margins last quarter. If they ramp sales to get to their #s they put out on the call I will be happy but they are just pushing product at no margin. If they really were a market leader they could demand margin. I'm going to give them another quarter to hopefully see margin improvement.
Seems to me, this comany is making a lot of new products with large potential markets, that enable companies to save huge dollars on energy costs. Why is there such a negative outlook, given the potential growth? Are there better competitors out there? If so, who?
Gonna dump my 2k shares this Friday, unless I see any positive movement. I just don't get it, even Cree is not doing well? Plus Question makes a compelling point.
if their products are so good then why aren't their facilities done with them. No LDR's in the office, no LED exteriors, no LED interiors. Wonder why? Do as I say not as I do???
Sentiment: Strong Sell
The decline in margin that they mention of 11% was NOT impacted by the inventory writedown. With the writedown they had negative margins. Excluding the $12.1M of inventory writedown they had product margins of 12%. In Q1 2014 they had product margins of 24%. This is not good. From Q1 to Q2 the product shift has swung from old to LED and the margin is collapsing.
I have to listen to the call still but the numbers are ugly.
There is a little leeway but when I worked in finance for a manufacturing company we would writedown any asset if we could not expect to use it in a year. Therefore if we had $3M in parts of one type and we sold $400k of it annually we would write down $2.6M. Based on the size of this writedown compared to their inventory they probably didn't writedown any asset unless it had not been used in a period of time. Per the item above they may have not written down anything as they were still using it.
I'm not a fan of it and I'm not an accountant but an outside accounting firm probably has been on them. I wonder if the head of operations being out delayed this decision.
Obsolete inventory has been languishing for a couple of years. Finally bit the inevitable bullet.