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Ceragon Networks Ltd. (CRNT) Message Board

  • inettor inettor Mar 22, 2008 8:55 AM Flag

    Why Does Not CRNT Buy Back Shares??

    With 91M in cash or 2.74/sh and stock price at 6.88, they can buy almost 50% of the float!!

    -Take out the cash, it's only 4 something per share.
    -The company is making good $$.

    Why not?? Can someone explain?

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    • Yep!!! it looks pretty cheap. If there's no recession, this thing should be back up. If there is a recession, this stock will shed more. Why? because if companies cut back on spending, this company will be loosing money.

      • 1 Reply to ptran2007
      • Despite the logic of most of YouHaveSome's rebuttal, I stand by the conservative idea of hanging on to cash for future opportunities or to weather future distress. I'm not smart enough to know which companies may best be integrated into their product/manufacturing/distribution system - if any.

        In a perfect world the insiders would step up to the plate in a big way - they only own about 15% of the company. If 5 of them plunked down a mere $50,000 each - the stock would spike as much as a buyback (maybe a $1 or $2 over a one month period as a guess) AND they'd still have the co. cash to work with. Granted, it doesn't shrink the total outstanding share base which is appealing, but it does say more to any potential partner how confident management really is. If they each bought 10 times that amount - the impact would be amplified a bit, but they don't have to be heroes.. Let's not forget that doing an offering and then shortly thereafter doing a buyback implies that management had no real goals for the $$ and will have inadvertently placed placed a ceiling on their stock price in the area of the prior offering price. Not to mention that the next offering will likely be done on less than favorable terms as any buyers would view such a sale as opportunistic, higher risk and therefore a bigger discount to the current price at the time.

    • Thanks for your cool arguments guys. After reading all of your posts. I have to agree w/ Youhavesome for the following reasons:

      1. FED will keep interest rate low for sometime to help the eco ==> value of US dollars will be low. Instead of holding US122M of cash, Why not exchange it for something more valuable --CRNT stock at a deep discount(unless management don't believe in the company's prospect)

      2. The argument to have a lot of $$ to gain biz from big customers if it is valid, then big customer would also check CRNT depressed stock and wonder if something goes wrong. Plunging company stock price does not leave good impression either.

    • youhavsomesplainnntodooo youhavsomesplainnntodooo Mar 25, 2008 12:39 AM Flag

      <<Let's assume that management had the foresight to expect a slowdown and at some point may make a play for another complementary company. Saving money for that rainy day is wise, especially with so many storm clouds already on the horizon.>>

      Complementary in what way specifically? what part of the network are you speaking of? High capacity point to point over microwave is a pretty specific expertise; venturing into the access side (point to multi point)would have the company exposed to significantly higher levels of risk than they currently deal with. If you want to harp on the idea of a buyback, the idea of an acquisition should, in theory, scare the bejesus out of you.....they almost never work.

      <<A year from now if the industry is going strong and their stock is still cheap, let them back up the truck and load it with shares.>>

      Except the stock is cheap now. 9 months from now the stock could be 50-100% higher than it currently is.......assuming the industry is "going strong".

      <<A lack of patience has cost countless companies dearly in the past 9 months as they listened to their 30 year old investment bankers telling them how to rid the BS of "excess cash" or worse borrow money to buy back stock>>

      Obviously it depends on the company, but the proposal i made earlier had the company retaining $50 million dollars and increasing earnings power by ~23% ($.75/$.61) over what they would earn if they maintained cash at current levels

      A company growing earnings at 56% ($.75/$.48) yoy is worth a lot more than a company growing earnings at 27% ($.61/$.48) yoy

      Borrowing money to buyback stock makes some sense given the Feds current monetary policy....negative real rates are alive and kicking in the US. Heavy cash flowing companies like Western Digital or Seagate could certainly justify funding a significant buyback program using debt......actually, seagate is. I don't know that I'd be real comfortable with Ceragon trying a stunt like that unless they knew a big revenue bump was coming.

    • If space would allow me to list all of the companies that got talked into buying back stock that were then later forced to sell equity at lower prices than the buyback price, I'd run out of room. Let's assume that management had the foresight to expect a slowdown and at some point may make a play for another complementary company. Saving money for that rainy day is wise, especially with so many storm clouds already on the horizon. A year from now if the industry is going strong and their stock is still cheap, let them back up the truck and load it with shares. A lack of patience has cost countless companies dearly in the past 9 months as they listened to their 30 year old investment bankers telling them how to rid the BS of "excess cash" or worse borrow money to buy back stock. Let's hope they don't fall for the same snake oil sales pitch. The small erosion of purchasing power implied by inflation and interest rates would have been a cheap insurance cost for many companies that are now trying to scamble to find financing in a tight market.

      The price drop is tempting to capitalize on, but I'd much rather they pass for now.

    • youhavsomesplainnntodooo youhavsomesplainnntodooo Mar 24, 2008 8:14 PM Flag

      So you'd rather see the company do nothing with the cash than buy back that dilution for a little more than 50 cents on the dollar? Regardless of why the issue was done (i'm of the thinking that it was purely opportunism), when a grumpy mr market is willing to part with his shares at a fraction of their worth, we should accommodate. "We" includes "the company".

      Ceragon is not a capital intensive business, there is no real justification for having so much idle cash. When real rates are negative, management should be levering up, not siting on cash.... a US$ loan would also be a good hedge against a falling US dollar. One could actually make an argument that sitting on all that idle cash demonstrates a lack of confidence by management.

    • youhavsomesplainnntodooo youhavsomesplainnntodooo Mar 24, 2008 7:33 PM Flag

      How much "extra financial strength" do they need? Unless their business is going into the toilet for the next three years and the company will be operating at a loss, management should be putting their resources to work as efficiently as possible. They have stated many times, on no uncertain terms..... that they see their top line growing 25-30% annually for 3+ years. That being the case, management should be pulling every lever imaginable to get as much of that growth to the bottom line. Sitting on a mountain of depreciating US dollars is ridiculous - particularly when it is becoming very clear that Bail Out Ben has the printing presses operating around the clock and is actually going to try and inflate the US economy out of its current woes.

      Customers will come in droves so long as the company can continue to offer a compelling bit/dollar solution - I hardly think any potential customer (big or small) is going to spend a lot of time pouring over Ceragon's financial statements. Sure, it is important to know that your supplier has the resources to deliver the specified product on time, but Ceragon (when they had a lot less cash in the bank) had no trouble ramping up production when Nokia came knocking......why would it be different now?

      I hope my comments aren't being misinterpreted as bashing, I love the story here and have been long since the stock was under $6....before the roller coaster to $21.89 and back. The company has, for the most part, been very well run; failing to take advantage of the opportunity to buy back their stock at current levels would be a mistake IMO.

    • I for 1 would like to think the recent dilution to shareholders was not done for the purpose of a buy-back program. It would show management as undecided for their business plan in my opinion.

    • >>The idea that a tier one carrier will only do business with Ceragon if they have $122 million in cash....but won't do business with Ceragon if they only have $50 million in cash is a tad far fetched.<<

      Ceragon is competing with a whole bunch of other suppliers for the businesses. You have to show all your merits as much as you can. Having more working capitals is always a plus, especially for a small cap and in the current tight-credit financial environment. $50M vs $122M might not be the number one criteria to be chosen for a contract, but [in case] all other things being equal, this bit of extra financial strength might help.


      ;-]

    • youhavsomesplainnntodooo youhavsomesplainnntodooo Mar 24, 2008 4:01 PM Flag

      When you have an opportunity to invest in your own business at a steep discount to intrinsic value, you take it.

      The idea that a tier one carrier will only do business with Ceragon if they have $122 million in cash....but won't do business with Ceragon if they only have $50 million in cash is a tad far fetched.

    • I don't take management's words at face value, but I believe their claim about the need of an extra-strong balance sheet to go after tier-1 carriers business is fair and genuine. For the many years that I follow this company, the management has been prudent and conservative, and execution good to excellent. I'll give them some time to show us what they said they planned to do.


      ;-]

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CRNT
2.36-0.04(-1.67%)Sep 16 4:00 PMEDT

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