yeah - it must have been exactly this "overly conservative nature of this company" which lead management to project quarterly revenues of around $900 mln for the second half of the year on the last conference call before the desaster started.
with regards to the new order taken directly from the press release:
"This new purchase order does not alter the customer's decision to eventually transfer its future orders to other suppliers with lower assembling charge. This order only offers temporary relief for the Company and does not guarantee that any new future order will be awarded. In addition, the customer may cancel any or all of this purchase order with payment of a cancellation fee to the Company."
despite the great market which makes shorts in any weak stock run for cover these days I still believe that this one should move much lower over time as there won't be any earnings for an elevated time frame. The upcoming elimination of the dividend for 2014 will be the inflection point for shorts here.
Yes because a truly conservative company,when asked to project revenues, would have said ,"We have no idea. We have orders which come in around 900 million, but those orders could be cancelled,in the future our supplier could demand a lower price structure, WWIII could begin,there could be world wide famine,studies could show that Iphones cause cancer...etc. etc.
But it also says "This new purchase order does not alter the customer's decision to eventually transfer its future orders to other suppliers with lower assembling charge."
So it sounds like JDI will eventually use someone else. The orders may end sometime in September, a few months after, or even a month or two early if they are willing pay a cancellation fee. It all depends when they find a supplier that is willing to sell for less and how fast that company can set up the assembly line.
However this does give Nam Tai a few more months to find another customer to replace JDI and keep their factories open. Finding a customer with more stable and guaranteed orders is better than one with wild order swings and frequent cancellations.
Capacity is a major issue as well. The ability to actually deliver quality product ON TIME is huge when telcoms are fighting to get to the customer with the latest greatest FIRST NTE is well positioned to DELIVER!
The desire to use the supplier with the lowest assembling charge isn't unique to this industry. Other factors must be taken into account as well, the foremost being quality. The company contracting out stands to lose too much with an end product that has been assembled with inferior components. If they could've been assembled cheaper without quality or capacity issues, they would have been.
This may not move the stock price much. The orders only extend the production until September 2013 and non of it is guaranteed and the customer can cancel at any time. This is just a life line to the company. I feel things will work out and I am a long term holder of this company.
I think this is excellent news as it shows the Company is not only still in business but in tune with the market and investor sentiment/ concerns. 4/29 was a crazy day but it appears some stability is returning. I am expecting a pop today which will hopefully get people looking at the fundamentals again
Sentiment: Strong Buy