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Echelon Corporation (ELON) Message Board

  • dolphinooo dolphinooo Aug 27, 2013 7:33 AM Flag

    NEWS Esco puts its smart meter unit on the block

    Google: "Esco to Sell Its Aclara Smart Meter Unit"

    The industry is bloated with competition, consolidation is unavoidable.

    ---------------------------

    Who might Aclara’s prospective buyer be? The smart meter industry has been awash with mergers and acquisitions, making it more difficult for mid-tier competitors like Aclara to keep up. Landis+Gyr, itself an agglomeration of several smart metering brands such as Cellnet+Hunt, was bought by Japan’s Toshiba for $2.3 billion in 2011, and has since pushed its way into a leading role in Japan’s smart meter rollout plans.

    While the private equity firm that sold Landis+Gyr to Toshiba is believed to have made money on the deal, most of the other smart meter acquisitions of the past few years appear to have been far less profitable for their investors. Those include Itron’s purchase of cellular smart meter provider SmartSynch for $100 million in 2011, and grid giant ABB’s acquisition of Tropos Networks, a startup with Wi-Fi mesh networking for utilities and cities, for $35 million last year.

    We’ve also seen smart metering companies move from publicly traded to privately held status. The biggest deal along those lines was British buyout firm Melrose PLC’s $2.3 billion acquisition of German smart meter company Elster last year. Given the uncertain and challenging market for smart meter vendors, there’s also been plenty of speculation that other big companies in the space could be acquisition targets, such as U.S-based Sensus, as well as Itron and Echelon (ELON).

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    • I know you like the current price range of Echelon and think it is justified but I think its a crime and I question the motivations of the board and management. When you have a high tech company that is in a segment of the industry that is going to grow over the next decade in double digits and it is trading for less than $1 over book value that isn't right. Oshman would have never allowed it, and I think the intangibles/goodwill he brought to the company and the industry was reflected in the stability of the stock price. I like how current management is positioning the company and how they are managing head count and cash flow, but they need to start announcing something that will improve the stock price whether that is new contracts and/or a stock buyback. Even is they are open to an acquisition they can't allow the stock price to languish at these levels. I question the decision to have Sege be both the CEO and Chairman of the Board, that doesn't seem to be working well for shareholders at this time.

      • 3 Replies to lonworkcharlie
      • "... I know you like the current price range of Echelon and think it is justified but I think its a crime ..."

        Yes, I do believe ELON _AS IS_ is valued appropriately with a PPS in the low $2's.

        Consider that ELON is off ~$45m to ~$50m in revenues just to break-even. Their subsystems go for ~$10 per meter, and system-level meter prices will continue to fall. ELON's next large-scale opportunity is Wien Energie, which is about 8 1/2 months away from decision making. If the Wien deal generates $100m over a three-year rollout, ELON is still off break-even. Then, Sege talks about ~$35m revenues from Poland and $10m from the Middle East, but that's again mostly Holley/GE/Mitsubishi subsystem revenues spanning years. Meanwhile, revenues from building automation continue to decline. If we consider other opportunities in China, Brazil, and Norway, etc., we may expect break-even in FY'15 at best. As regards cash flow, ELON lived off its working capital so far, but according to Slakey this will end soon, and we will see a $3m to $5m cash burn a quarter. Also according to Slakey, that gives ELON a cushion of two years. Then, Slakey doesn't think a share buyback program is in the best interest of ELON. Finally, even Sege starts talking about LonWorks as a legacy protocol.

        All this won't excite possible buyers and venture capital.

        IMO, Sege was not able to sell ELON for much more than $3/share. Now, his strategy is to prop up ELON's business with a wireless/IPv6 acquisition that can generate additional revenues. A _meaningful_ acquisition, however, will cost a bit more than Sege can afford. He will need venture capital or Rights Issue, but this will likely increase the number of shares. Fortunately, given a PPS in the low $2's, such a move would likely be considered positive and NOT push the PPS further downward, IMO, but long-term it would obviously lower the cap for ELON's PPS.

      • With all due respect Charlie, what makes you think the current price is too low based on revenues? Their revenues are shrinking year over year, not growing. New business is almost non existent. Their market cap is over 100 million dollars. Why would anyone pay that for their portfolio? Management is excellent at securing partnerships, but if their partners are incapable of selling the product, what good is the partnership? Just because the industry is projected to grow, that doesn't mean Echelon is going to grow. They had cutting edge technology 10 or 12 years ago. Now they are being passed by bigger companies with more money to throw at R & D. In fact, while you think the current price is a crime, I wouldn't touch this stock at this price. I have zero doubt it will be sub 2 by years end. The only question is how far sub. then the clock starts ticking on nasdaq delisting. We do agree on a stock buyback, but that should tell you how little confidence management has in being profitable anytime soon. They need that money in the bank to make up for the revenue shortfall.

      • "they need to start announcing something that will improve the stock price whether it is new contracts and/or a stock buyback".....Duh? (no offense) .. It ceases to amaze me that from a company that was suppose to have contracts "pouring" in they dried up like the Sahara. I mean nothing. Some of this was beyond Ron Sege control as obvioulsy the markets did change and some of it he has to be held responsible for......And btw a stock buyback would mean and do absolutely nothing so to me that's something I don't even think about. All these guys needed to do is secure ONE "decent" contract in this this recent time frame to at least stabilize the stock price (and the stock price action is intentionally being worked down. Every time they manage a 7 cent gain it is knocked down a penny at time with just a few shares. Particularly at 3:58pm). ..ELON reminds me of the NY baseball team I root for the Mets. They haven't made the greatest decisions in the world as an organization and than again they really have been blindsided by just a real bad series of du*mb luck coincidences that just have not fallen their way.

 
ELON
2.01+0.08(+4.15%)Oct 21 4:00 PMEDT

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