You have certainly been right about Dragonwave in the past and were right that the South America risk (o.k. and Africa) risk was already "baked in."
Still, do you really think revenue could decline further? Suppose NSN could cut them loose if they decide Dragonwave is never going to pay them the money they owe them. Last quarter was bad, awful and the prior quarter just as bad. I think Dragonwave will have another awful quarter but they will delay until the US Cellular revenue begins to kick in and although the second quarter will still be bad, they will celebrate it for all they are worth.
Just to be a little rude, the announcement from CRNT today contrasts interestingly with DRWI in terms of
*More conservative accounting. DRWI booked a large acquisition gain on NSN and subsequently wrote most of that off. CRNT didn't book a gain when they acquired Nero but they are certainly going to do so next quarter. I don't think CRNT is conservative to be honest but they are far less aggressive than DRWI.
*Management quality. CRNT recoups 35% of the purchase price of Nero as they are simply more on top of things. Also, CRNT walks away from a customer and says the terms need to be renegotiated. Seriously doubt Dragonwave has ever walked away from any customer.
*Guidance. CRNT said they will be at operational break even next quarter. With the Nero non-operational gain, they will be very profitable and things should really start to roll in the third quarter. Not that I'm not still worried about South America and other things. CRNT is risky but it seems like a good risk/reward. I do think the non-Needham analysts will be increasing their targets here before long even if they don't raise them to buy. The indicators and the call were good.
Thanks Cohs, you bring forth some very valid points and you seem to have done your homework on both of the aforementioned companies......When I said the South America currency issue was baked in it was because we already knew there were issues last quarter and they weren't going away any time soon.....CRNT, turned down business with a customer because they are smart they know how to manage money and risk for that matter.
DRWI, is done they will no doubt have to raise money one more time and it won't come from Tim McDonald or any other bank / investor....As a matter of fact if they can't shore up the balance sheet their line of credit / lifeline will be cut off.
Anyone going long this company knowing what I know is playing Russian roulette and the 6 shooter has 5 rounds in it......
Speaking of guns I shot a 12 lb. Muskrat last night just before dawn with a 12GA over and under using 00 buck shot at about 30 yards.....Almost spilled my beer....lol