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Vixel Corporation (VIXL) Message Board

  • runlong_1999 runlong_1999 Nov 20, 1999 4:11 PM Flag

    News Flash on 10Q's

    There have been a lot of posts lately about the
    10Q. The doomsayers are pointing out all the
    "negative" wording and the longs are discounting it saying
    it is just boiler plate wording.

    As I have
    been a CPA for many years, have worked for one of the
    three largest public accounting firms in the world, and
    have actually written portions of 10Q's for clients, I
    think I am qualified to make a few comments on this
    subject.

    I happen to be long on VIXL so one could argue that
    I am biased, but the objective truth is that the
    longs are right on this one. If you want to know the
    truth, 10Q's are rarely worth the paper they are written
    on. Oh sure, you can find some useful info in them,
    but you really have to know what to look for and how
    to sift through the garbage. I know this will be
    disputed by those that like to pour over them, but in my
    opinion they would not value them so much if they knew
    how and why they were written. The 10Q is nothing but
    a company's giant CYA...COVER YOUR ASS. All of that
    "negative" language is COMPLETELY GENERIC legal-motivated
    boiler plate protection. Hell, when the CPA firms help
    their clients write them, half the time they just copy
    sections over and over from other client's
    10
    Q's.

    Diligent stock research may demand that you read a
    company's 10Q, but my advice is to just take it with a
    grain of salt.

    As always, this is just my
    opinion and I welcome comments, pro or con.

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    • All serious investors must read Vixel�s 10-Q. The
      link is:


      http://biz.yahoo.com/e/991117/vixl.html

      The section below is pasted from Vixel�s 10-Q and is
      unusually disturbing (see my previous Post #1753). This is
      an astounding admission from a company that intends
      to become a supplier of components to the Storage
      Area Network sector, where reliability is everything.


      <A COMPONENT IN OUR TRANSCEIVERS HAS EXPERIENCED AN
      ABNORMALLY HIGH FAILURE RATE WHICH HAS ADVERSELY AFFECTED
      AND COULD IN THE FUTURE AFFECT OUR SALES.

      Our
      gigabit interface converter transceivers, or GBICs, and
      our gigabaud link module transceivers, or GLMs,
      manufactured prior to March 1999 incorporate a compact disk,
      or CD, laser manufactured by a third party. GBICs
      are removable and GLMs are non-removable devices that
      convert optical and electrical signals. We have observed,
      and some customers have confirmed, that in certain
      applications our BBIC and GLM transceivers that incorporate
      this CD laser have experienced an abnormally high
      failure rate. Although we recorded a warranty reserve of
      $3.6 million in the fourth quarter of fiscal 1998 as a
      result of these problems, there is a risk that this
      reserve will be inadequate to implement a remedy that is
      satisfactory to our customers. In addition, we cannot assure
      you that, over time, failure rates for products that
      incorporate these CD lasers will not increase or that the
      lasers which we began using in our GBIC transceiver
      products in March 1999 will not experience problems.
      Claims against us in excess of the amount of our
      reserves could have a material adverse effect on our
      business and financial condition.

      As a result of
      this problem, Sun Microsystems has reduced its
      purchases of GBIC transceivers and in August 1999, we
      issued to Sun Microsystems a warrant for 150,000 shares
      of our common stock. In addition, if we are unable
      to resolve this matter to our customers'
      satisfaction, or if failure rates in transceiver products
      increase, our reputation and relationships with current and
      prospective customers could be damaged and adversely affect
      the sales of all of our products.>

      FACT: In
      response to my previous posting of this excerpt (see Post
      #1753), several Vixel longs have provided examples of
      negative comments in the 10-Qs of other companies (see
      Posts #1763, 1764, 1765, 1769), but their disingenuous
      ploys to divert attention from the real issue is
      transparent.

      FACT: Vixel�s 10Q is uniquely ominous
      because it contains the astounding admission that VIXEL�S
      PRODUCTS ARE FAILURE-PRONE, VIXEL�S CUSTOMERS ARE ANGRY,
      VIXEL IS TRYING TO APPEASE THEIR ANGRY CUSTOMERS WITH
      REFUNDS AND WARRANTS, BUT VIXEL�S BIGGEST CUSTOMER
      (SUN
      MICROSYSTEMS) HAS CANCELLED ORDERS ANYWAY.

      FACT: I
      expect that Vixel longs will repeat their assertions
      that all of this is commonplace and appears in the
      10-Qs of other companies all the time. BS to that. Show
      me the data. I have never read anything so
      astounding in the 10-Qs of any company that I have
      researched for possible investment, ever.

      FACT: I
      challenge the Vixel longs to post on this board the
      excerpts from the 10-Qs of other companies that admit to
      �abnormally high failure rates� in components shipped to
      customers. I challenge the Vixel longs to post on this board
      the excerpts from the 10-Qs of other companies
      admitting that their angry customers have demanded millions
      of dollars in refunds, millions of dollars in stock
      warrants, and then cancelled future orders anyway.


      FACT: Get busy Vixel longs. I predict that you won�t
      find any comments that are remotely comparable to what
      I have posted from Vixel�s 10-Q in the SEC filings
      of any other companies. You will, of course, find
      such disclosures in the SEC filings of those companies
      that have already gone bankrupt.

      • 2 Replies to san2003
      • As a matter of fact not to many people were using
        Fiber as a means of transporting data before March
        1999. In fact I think sun was the only major
        manufacturer that uses the GBIC Modules. Fiber is just
        starting to get interest now and anything done before
        March 1999 is really not worth worrying about. Besides
        VIXL also sells the high end stuff like fiber switches
        and fiber hubs. If you want to base your short
        position on sales before March 1999 then good luck......I
        have been in the market for some time now and to my
        knowledge people buy stocks based on the future outlook not
        yesterdays news.


        good luck to all....

      • products manfactured BEFORE 3/99 and was due to the "COMPONENT" maker, not VIXL!
        guess what? this is NOVEMBER 1999 and VIXL no longer uses those components!

        past is past Timba!