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Zhone Technologies Inc. Message Board

  • gotstucknow gotstucknow May 25, 2010 1:52 PM Flag

    We all know what's at play here

    The Q before last was a breakeven, preceded by 6 years of steady losses, and now the last Q again a steady loss like in the old times. Picture what this does with the mind of a professional/institutional investors. Right.
    If the next Q is more of the same loss, then it's a bye bye for the stockprice; below 1 dollar for sure. If it's a breakeven or even a profit, ok, then we may reach 2 dollar again and the death agony of this pos is prolonged with some Q.

    If we have the first case, then I assume 6 Q are left before the dying breath. The stock price will reach 50 cents much earlier, in the last months probably wobble between 10-30 cents.

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    • Not even close, imd85, truly sorry.

      Again back to the balance sheet.
      The value of A/R (around 35k) is offset by the value of short term A/P with an equal amount.
      In plain English: the cash received from customers paying their invoice, flows directly to Zhne's suppliers to pay for the raw materials and services supplied.

      The only thing left that strikes out as "valuable" on this horrifying balance sheet is
      1) the cash on hand 28k (dropped from around 38k year before)
      2) the value of the inventory, around 30k

      As any professional knows, the inventory is not sellable anymore in case of bankrupcy; easy to understands, which telco is going to buy equipment from a company out of business?

      Leaving only the cash at hand, which is dangerously shrinking year over year; at the current rate 6 quarters are left before the plug is pulled.

    • Cash per share is now about .70 cents per share and A/R per share is what over a $1.00. The building probably covers all debt on the balance sheet and equity left over.

      So could this go to .50 or .30? I dont predict stock prices. But if it goes lower I am buying.

      During flash Thursday the tree was shaken to 1.48. If it breaks that hold your nose and buy if the overall market isnt falling with it.

      Every telecom stock on my watch list has been down. It boils down to the fact that governments do a lot of the spending or stimulus for these products. Governments arent going to be spending as much. Stocks are forward looking. Plan accordingly.

      If Mory and Kirk are smart they should be shopping the company. Small isnt going to be better going forward in my opinion.

      • 1 Reply to imd85
      • Zhne's problem over the last several years is flexibility in getting refinanced. Current debt from bankloans is offset by the value of the campus building (collateral is you will). There is not much room to increase refinancing since likely 100% of 'valued' assets is collateralized. To draw capital on the market by issueing new shares is no option either. They (insiders) would shoot themselves in the foot because of the dillution effect, and second, who's gonna buy shares from a company that has been loosing money since it's incarnation? If you can paint a picture that you need it to increase and expand business which alredy is profitable, fine, but if reality shows you've been loosing money for 6 years, everybody can draw the link that the threasure chest has become empty.

        So what's left for Zhne to watch like a hawk is their short term cash. At the current burn rate, supposing the Q losses stay the same, 6 Q are left before cash is reaching zero (see my post from 2 weeks ago).
        But like youv'e said, PEG (price/earning growth) is what's important to the market. So if the growth is steady and predictable, investors pay the price now that the stock may be worth in a few years. The opposite is equally tru; if losses are steady and predictable, investors sell now at a price the stock is worth in few Q, hence my 50 cents estimation.

        The bottom line is, next Q will be a make or break Q. If it's again a loss like we had past 6 years, whatever remains of confidence in this pos will be gone. If next Q is profitable, than Zhne is not out the woods yet but at least the stock price will climb again.

        If it's the loss case, and we reach the zero cash level, creditors/banks will confiscate the building and whatever is left from inventory will probably be auctioned to the public at near zero prices.

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