They got fairness opinions from investment bankers that generally said $3 was high although there were arguments for higher and much lower. I wouldn't hold out much hope for a higher price but stranger things have happened.
A breath of fresh air but that doesn't change that there are powerful interests aligning against them. I really like the fact that they mentioned that the HFTs are not Wall Street insiders.
You know, I don't claim to really understand all or even most of the issues but I would like to make an argument.
Could it be that the more established players are worried about the new people making markets and making relatively new products such as ETF's actually workable? These new exchanges such as BATS and ETF's actually make trading more efficient. They are doing so outside of the old established exchanges and are based in places such as Kansas, Texas, Illinois and New Jersey rather than New York.
The fact that these alternative venues and innovation are taking place outside of traditional money centers also creates a potential political dynamic. If I were a Kansas or Texas politician I sure wouldn't view this effort to put down new venues that are competing in the marketplace.
Just an argument. Might be valid, might not be but I do know that established players do not like innovation from new players in any industry.
Really it is impossible to say for sure but I have a hard time imagining a situation where increased scrutiny from regulators can be good for anyone other than those who want to take market share from current participants. It is a negative that is impossible to quantify.
The proxy said that ACP withdrew an earlier proposal due to concerns about their causing problems with ACP making its filings following the closing of a deal. Would be nice to know if they still have those concerns and what was being done about it. Perhaps ACP needs the basic Tower accounting control structure (such as it is) to not continue to deteriorate or they will pull out. As to what the drop-dead date is, I don't know but I think that the one big accounting issue rather than actually filing the 10-K.
Of course, the business issues are pretty important too.
I think the language was more than just boilerplate. They talked about the lack of internal controls (that is boiler-late), but the cut-throughs and regulatory filing associated with the merger would present current and on-going difficulties. Given the situation they should have provided more information on staffing and efforts to keep things under control but I can only recall one other company I've seen make a disclosure like that.
Not nearly as paranoid as I have been about CRNT. Plenty of risk but not as much as I feared. 20F should be out soon but I don't think there is going to be much to talk about anytime soon.
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.
They are three reasons I can think of. First, they are burning cash at a pretty high rate so they really need it or their customers are going to feel pressure in a couple of quarters. Second, it is just good business sense because as bad as it is, it can always get worse.
If you want to be optimistic, you could assume they need the working capital to support increased sales.
Suppose there is a long-shot possibility that they buy Dragonwave given their distressed situation but even Dragonwave at a $20 or $30 million purchase price (current market cap is far higher) would be tough to pull off but if Dragonwave runs out of cash one just never knows.
Up 3.4% now. The Nero settlement was a positive surprise. Obviously, viewed more positively than the sales miss, at least for now. Good.
May be my last comment until this evening but I don't think I will be able to listen to the conference call. If anyone can post factoids, I'd appreciate it
Price has increased. Down less than 1% We'll see what happens later and what the conference call says but there may not be a decline in share price. Really it just depends on who decides to sell and how the media chooses to spin things.
I will say that I expect them to be profitable in second quarter. I can't say how low the price will go and for all I know some big Venezuelan or Argentina customers will go bust but I like the book to bill ratio and they will have a gain on the Nero settlement that will make it easy to report a fairly material gain.
Ceragon's purchase price for Nero went down to around $30 million as sellers are paying $17 million as damages for misrepresentations. It is hard to say what that means but I think it is bad for Dragonwave's acquisition prospects. Not prepared to call Ceragon's acquisition a failure, it is an outright success compared to the two DRWI acquisitions, but in retrospect it probably was a mistake. Give it another year to say for sure.
I do have some reasons to be hopeful on currency. There are going to be losses in Argentina but believe it or not, it is conceivable that Venezuela won't have any losses if their products fit in the right regulatory scheme. If they don't fall in the right regulatory scheme I would be surprised to see a $5 million loss. Suppose $5 million is more reasonable but it really might be zero.
No getting away from losses in Argentina. I have no idea of what the cost will be there that I could justify as being anything other than a wild guess.
I don't agree. This actually wasn't a bad disclosure although I won't say the share price won't go down. It is now down to around $2.80 in US Dollar terms in Israel so it is safe to say the price did go down. Maybe it will go down more, I don't know.
So having said that, I will likely be buying after the conference call for the following reasons:
1) They are refusing to ship to a customer who I assume is in Venezuela or Argentina pending adjustment of payment terms. They have been enduring significant losses due to devaluations and one of the things that has always scared me is that (a) they get hit with a big devaluation as happened in the 1st Q of both this year and last or (b) they just can't collect or struggle to collect as businesses are in great distress in these countries. Telling a customer you can't sell to them does cause declines in sales and probably even opens things up for competitors but they have to be willing to walk away if necessary from certain customers if the risks are too high.
2) $73 million is 12% below guidance and 19% below last quarter. That isn't great but again, better to walk away from Venezuela and (maybe) better to walk away from Argentina. The bookings were likely around $100-$110 million and this means revenues are going to move up to levels that will generate profitability assuming margins are o.k. and they don't have a currency debacle in Venezuela and Argentina.
3) $17 million in cash from Nero acquisition adjustments. That is far higher than I expected. That means they only paid around $30 million for Nero. Now Nero was burning cash like it was going out of style but they were reasonably big. Does that mean that Ceragon, Dragonwave, AViat and privately held SIAE Microettronica (private co) could only sell out for similar measures. If yes, this is disastrous for the weakest competitors.
The one thing I really would have like to have seen was currency impact in the current quarter.
Would be nice if they could release sales and impact of South American devaluation issues sooner rather than later. Not overly concerned about sales but would like to hear that Venezuela and Argentina aren't going to have huge devaluation and collection issues.