More signs. : "Juniper was upgraded at RBC Capital to outperform from sector perform. Twelve-month price target is $29. Sales appear to have stabilized and there are early signs of higher telecom spending, RBC Capital said."
From Juniper's earnings release this evening:: " As for the Tier 1 carriers in North America, Rahim said Juniper "remains very close to all of our service provider customers, including those in North America and we have good visibility into projects we are working on together and good visibility into the trends that are happening. Based on that we are pretty confident we will see an improvement in spending and demand in the second half of this year."
So earnings season is starting to kick in and it is time to pay attention to what others are saying about sales in N America. This from FFIV today: "Our second-quarter FY15 was marked by solid sales in North America, where we saw both a rebound in sales from large deals compared to our first fiscal quarter, and record sales levels in our service provider vertical"
I just saw this SEC blurb in a correspondence filing by WSTL2. In future filings, please expand you explanation of material drivers of changes in your financial results to address not only the causes of the changes but the reasons behind why the causes occurred. For example, you disclose that your financial results were negatively impacted beginning in August 2014 by “significant reductions in carrier capital spending…” Such a discussion should also address why customers’ capital spending dropped and whether management believes this to be a seasonal event going forward.2. In future filings, please expand you explanation of material drivers of changes in your financial results to address not only the causes of the changes but the reasons behind why the causes occurred. For example, you disclose that your financial results were negatively impacted beginning in August 2014 by “significant reductions in carrier capital spending…” Such a discussion should also address why customers’ capital spending dropped and whether management believes this to be a seasonal event going forward.
So basically the SEC is now asking for WSTL to tell us why they think the management teams of other company's have decided to lower spending???? This seems like an over reach to me. A Telco or Tower operator has NO obligation to tell its vendor why they have decided to reign in spending. Now if Westell begins to see a trend every fall/ winter that lower spending exists, then fine, it is acceptable that they warn shareholders of lowered spending patterns due to seasonal spend. But by no means should they be obligated to state the motives and reasons that customers have lowered their spending.
Unfortunately, since WSTL has no competitive advantage, it really has to rely on execution to enhance shareholder value. They are in a space where they do not have any real product differentiation, so in order to even become an acquisition target, they need to be more efficient. They need to scale back operation costs and that inflated R&D budget as a percent of sales. The consolidation of operations was a nice first step, but they need to go deeper.they appear to be spending an extra 6-10% of sales on R&D versus competitors. Once these new "potential game changer" products come out mid year, then they should scale back that R&D back to 10-12% of sales. If $25M per quarter is the breakeven spot, then they need to get sustainable annual run rate revenues above $150M to become attractive provided that the company continues to drive cost efficiencies.
While it is good to see the two top people buy into the stock, we didn't see any additional follow through from any of the other officers or directors.
Back to my thought on packaging the company, I still think it is the only viable option. Last year when I saw Buzz Penny, his pony tail was silver and he looked a bit long in the tooth. While Tom Grunewald appears to have enough fuel in the tank for the short term and while I really like his experience, he too must have a shorter time horizon for this new role. Had the board been looking for a nice 5 year CEO run, they probably would have gone in another direction. I think Grunewald cuts expenses over the next year and gets the sales channels expanded, perhaps at the expense of margins.. If you add in a recovery in spending, Grunewald could get the sales up to $150MM on an annualized basis. Taking in the cash position and tax loss benefit, WSTL could sell at a 2X EV/ sales outing the share price in the $5-$6 range.. A large acquirer could gut the Ops infrastructure and expand distribution further and easily add WSTL as an accretive acquisition in year one.
Speaking of Insiders. I see the market maker took advantage of WSTL insideris yesterday for stock sales related to mandatory plan sales to cover taxes related to the stock grants. With a market maker like this handling WSTL, how can anyone trust the price from day to day.
On a side note, I noticed that Christopher Shaver is still listed as Sr. VP of Product Development per his stock filing yesterday.
Phenne, being in the industry gives you nice insights into some of the trends in the wireless space. While WSTL can be a beneficiary of the positive trends in the space, they clearly cannot go it alone over the long term to be successful. There are just certain benefits of scale that are undeniable in helping to strategically and financially weather periodic downturns and periodic product blunders.It is clear to me that Westell's only option is to position itself to be acquired. In my opinion, the new CEO should be focused on repositioning the products and the company for its "potential" synergistic and accretive fit into a larger industry player. The international expansion is a nice way to begin the process.
I really think that this is the company' s final move. Buzz PennyPenny is getting up there in age has to be at that stage in his life where he is looking at his corporate exit plan. There is no doubt that Buzz has been approached over the years with buyout offers. While as a younger man, he had time on his side to explore potential upside and decline such offers, he no longer has that option. I think Grunewald has a year to reinvigorate the e execution and rebuild investor confidence. I wouldn't be surprised to see extensive cost cutting measures and accelerated international deals to package the company up for a sale in 2016. A larger player could then swoop in, leverage scale, optimize resources further in both operations, sales and manufacturing .
There really wasn't much to say after Gilbert's Q2 comments back in October. He basically caused the Street to write off the stock for Q3 and beyond until there is positive data to reverse the move. The stock was going to be defenseless for nearly 7 months until the May earnings report. Since the March quarter report will be considerably after others in the sector, we should know if there has been a return in N American spending prior to WSTL's earnings release. If the spending trends are positive with other vendors, I would anticipate a move towards the end of April. Until then, don't be surprised to see this trade in a range
So Google has announced their increased presence in the wireless space. Since it now appears that they will be trying to push specific technologies to enhance coverage, and not just function as a reseller, I wonder if it is a conflict of interest to have their executive sitting on Westell' s board?? I guess it would look awfully strange if Google were to adopt a competitive technology while their guy sits on the WSTL board. Of course it is also entirely possible that Westell factors into the Google solution and gains market share. Well one can always dream!
True, the next 6 months of product introductions have been in the makings under Gilbert. However the reaction by the Street will be reactive to new management. Gilbert just had no clue in dealing with the investment community. He came off as defensive and timid.
Typically acquisitions are met with synergistic savings through headcount and operations consolidation. Gilbert only took this move as a reactive measure post last quarter's earnings. Then you have the lack of international business expansion. Gilbert touted the Kentrox acquisition for its international footprint to help grow the business yet there was no real effort to pull through any products until his recently announced " real wake up call" about N. American dependence?! That's leadership or lack there of. Westell has the products and footprint to grow but needs good execution to get there. The new leader will be judged on that execution.
I actually met him once. I should have gone with my gut reaction. He was not very impressive to say the least. He was not very polished and had little to no presence. CEOs do matter!!!!
OK. Now your talking. First Goodrich, now Gruenwald. Who is next? C'mon Minichielo, Shafer, Bandukwala. This sure beats those Gilberts timed sales.
That was from Scott Goodrich (CSI). Perhaps the new CEO is twisting his staff's arms to buy on the open market? Its about time
I am relieved that the board finally came to it's senses. It was most painful to listen to Gilbert's dismissive style over the last 3-4 conference calls. This last quarterly call was a joke. To say that their dependence on north America was a "wake up call" just showed his naivety in dealing with the investment community. If he wasn't coming off as a strong leader over the phone in an event that you plan for, one can only imagine how he was in his day to day leadership effectiveness. I noticed an immediate difference in the style and tone of the call with the new leader. He displayed a much better understanding of investor needs and is willing to show it. Now we will have a CEO who is actually willing to buy shares of stock in the open market instead of repeatedly selling them. I think that we will all see how a quarterly call should be run when the company reports earnings in May. This should initiate renewed confidence and interest in the stock.