Tried to listen to the conf call by clicking from their web site. It puts on the conference call but the webcast starts out somewhere during the question and answer session. They need to get that corrected. For now I will try to just access their viewgraphs.
Well, the reaction was because of the conservative 4Q forecast. To me that has no bearing on the company's long-term future. It just means they are being extremely proactive in trying to prevent boom-bust cycles for a business that experiences considerable quarter-to-quarter fluctuations.
Well, you never can be sure what happens but INFN has a lot of factors working in its favor to win the big fish:
1). A superior technology that cannot be duplicated by its competitors (any time soon, at any rate) that fits the optical network architecture of the future.
2). A solid track record established with the DTN product.
3). A growing base of well-respected customers for the new DTN-X product.
4). A strong balance sheet.
I am impressed with their solid cash position. I believe net cash is something like 225 mil.
A year or so ago I had the impression they felt they might need to dip quite a bit into their cash for capital spending to fuel their business growth.
But they aren't depleting their cash.
The bond issue they did still is a bit of a wild card from my standpoint. Trying to remember what the rationale was for that. I believe it was that it left them with a bigger pile of cash in case an attractive acquisition came up and they felt the need to pounce on it.
But I hope they just keep doing what they're doing now. The reason I and probably everyone here owns this stock is that we believe they have a proprietary technology that puts them in a unique position to be the dominant force in a fast-growing techology.
They're obviously trying to hedge the unpredictability in this business by being conservative on 4Q estimates.
To me the only real consequence of that is that it leads to a brief opportunity to buy some shares cheaper.
Now I suppose you could argue, hey why don't they make rosy forecasts, then when they have a quarter when not a lot of business comes in the stock will take a big hit and we will be able to buy more shares at a sale price.
But that would be kind of playing with fire. This company has incredible long-term prospects because of their proprietary technology. I think it is reasonable for their strategy in the shorter term to underpromise and make sure that the company doesn't suffer convulsions when a weak quarter hits, convulsions that could be a bit of a threat to their long term performance.
When they report a good quarter like this one I think it is sound strategy to give a cautious outlook for the next one.
Sounds good to me. I'd like to see it get up to about the 20 level after winning those contracts and then get a buyout at 30-35 or so. Don't want to get too greedy.
I believe one main reason that margins are initially low is that the "economy of scale" isn't too good at the beginning. Small production quantities will cost more unit to produce, and yields will be low early in the cycle before they have come down the learning curve.
Yes. As they have said in past company reports, the old product is the cash cow because gross margins on extra modules to fill up partially filled rack have high gross margins, while the initial sales on new product lines have low gross margins. They don't expect to make a lot of money on a new product initially, but when customers gradually fill up the remaining empty slots in the racks they buy, the margins on those add-ons are high.
A sort of #$%$ analogy would be to say they make their money on the popcorn, not the movie.
A cynic would probably say the high gross margin is bad, it means too much DTN and not enough DTN-X in the mix.
But I can't see myself complaining about good gross margin.
On the conference call link, there's some faint jazzy music in the background. I expect they'll crank up the volume for the actual call. In fact, perhaps they intentionally set that music at low volume. If you hear it you know you are all ready to go to listen to the conference call, but probably few people want to actually listen to the music.
Time to mosey over to INFN site and get plugged into conf call. Probably get treated to some Muzak before the call begins.
The INFN guy has good marketing skills. Every quarterly the pitch he makes in the conf call gives you the feeling this company is the next Apple. (the old Apple, not the one that's starting to fray at the edges now)
I see it as sort of a combination of the guy has the good fortune to be running a company with some genuinely awesome technology, but also he has the pitchman skills to ramp up the excitement even a notch beyond what would be appropriate for a promising company like this.
Expectations in the investor community for INFN's quarter are modest, thus it seems to me it should be very likely that they meet or exceed.
If PVG had a big cash pile I'd be bullish. Ride out the storms, Brucejack, even if it's not the best thing since sliced bread, is likely to be better than current reigning pessimism would suggest.
But to "ride out" you need a pile of cash. Otherwise you need to raise cash by selling stock at firesale prices. That's why I'm not holding any PVG.