Speculative investing institutions
taking quarterly profit to offset
loss in other investments.
Next 2 quarters are not as profitable
for CMGI historically. Odds are they
will be able to buy back cheaper.
Lawler as usual has stayed on the
sidelines and will hold his scripted
CC in June with maybe a few changes.
Like, don't expect a quarter like last
which was a Ventures gift he had nothing
to do with.
November or December we will again start
a new ascent that may take us to 3.
microsoft this week stated over 20 million vista systems sold in the first month, over double the sales of xp when it was released.this is good news not bad so keep on spinning.always look at both sides boys and girls.
The negativism surrounding the Vista Express Upgrade, in terms of customer complaints with how the program was being handled by ModusLink, is well documented; many posts here have been made on that point, and you can do a simple Google search to pick up some of the complaints. How can you say that is not going to have a negative impact on earnings? If ModusLink spent 5 hrs on the phone and email with a client, when it was supposed to be automatic with the website, how can you deny the negative impact on earnings?
We'll see in the q3 10-Q whether or not margins were adversely impacted. Remember q2 fy2006, when they had 9.5% gross margins? Here's what happened: "Within the Europe region, the six-percentage point decline in gross margins percentage was primarily attributable to $5.1 million of additional costs incurred to support a larger than anticipated surge in demand for a significant clients products in Europe during the holiday season. These costs primarily included higher freight expediting fees, warehousing and assembly costs, and distribution costs. " So there's an example of an unanticipated surge costing ModusLink bucks. Why? Why didn't the customer pay for those costs? Because the contract was for a fixed price, most likely a purchase order, but not necessarily. If it were cost+, then an unanticipated surge wouldn't hurt ModusLink margins.
See my point? It is well documented, and you have just agreed, that the surge existed, that it was unanticipated. It was so bad it crashed their website. On top of that, it was a comedy of errors and failed customer relations management. Read the gripes; it's a real and rare opportunity to see how ModusLink handled this problem. If the contract with Microsoft was fixed price, and most likely it was, then there is abundant rationale and evidence to support the HYPOTHESIS that earnings will be negatively impacted due to the unexpected surge in demand for the Microsoft Vista Express Upgrade. It would be no different than the q2 fy2006 example I just cited.
So I await the earnings release and 10-Q with interest on this point. If in fact there is a significant hit to earnings, then that would constitute two large documented instances of difficulty meeting demand surges at critical times.
"Next 2 quarters are not as profitable
for CMGI historically. Odds are they
will be able to buy back cheaper."
You can't base future eanrnings on historic data.
CMGI will benefit in the coming QTRS in several ways.
1) Elimination of low margin customers replaced by
higher margin customers. This is occurring now.
2) CMGI's future earnings will benefit from a lower
valued dollar since 2/3's of CMGI's revenues are
ebonnv: You should have elaborated a little more about replacing low-margin customers with high-margin ones. CMGI said in their Feb 26, 2007 press release that that "Hewlett Packard is migrating on" later in the year. In other words they are losing a $100,000,000 account which is almost 10% of their gross revenues.
Now, it may be a good thing for the long-term (if in fact it is a low-margin account) but for the short term it does not look good on an income statement and I am afraid that investors will act negatively in the 3d and 4th quarters.
I hope that I am wrong because I think that CMGI may have a bright future.
But you can't ignore the fact that q1, q2 are CMGI's surge quarters, and that gross margins are higher then than in the second half,historically. And the company has told us not to expect GMs reaching the level of q2. To ignore CMGI's rev seasonality is to omit an important component of their operations. Kodak and Intuit have been driving it.
CMGI has recorded unhedged foreign exchange currency losses for Asia and Europe of $1.2M ytd; last year thru q2 it was $1.0M.
The are expecting +.02 for Q3. Odds are they will beat that and last years negative quarter will go positive as well. Nice try but I don't think so. Next stepis $2.75, then it will probably pull back again like it did at $1.75. $3 is inevitable before June.