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21Vianet Group, Inc. Message Board

  • hageneriksson hageneriksson Nov 15, 2012 5:24 PM Flag

    in-line results, cash balance reduced by another $40 mln, guidance reduced

    I don't think analysts will be too happy with this announcement, Guidance is coming in substantially lower than estimated and cash is burning through at a very fast rate. At this burn rate the company will have to raise additional money two to three quarters from now.

    Utilization rate is down 15 percentage points but this shouldn't come as big surprise as management already guided to a substantial decline in this number on the last call based on the increased cabinet count which will take some time to be utilized. Doesn't look good anyway of course.

    Even worse the new Microsoft relationship requires substantial investment as evidenced by the press release. There will be license fees and the company will hire "200 to 300 software engineers, who will focus on developing, implementing and maintaining these cloud computing services and platform".

    This will further eat heavily into the remaining cash balance and might require the company to raise money even faster than supposed above.

    Expect analysts questions to center around the weak revenue and EBITDA guidance and especially around the cash needs of the company.

    Would short the stock.

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