For new investors, Vodafone is the new parent company of Kabel Deutchland. CCUR won contract for deployment of multiscreen for Kabel Deutchland two years ago, but the spending has been frozen/delayed due to the European recession and MSO merger activity. Both are coming to an end now.
Per the latest 10K, CCUR only recognized $1 million in spending in Europe. Kabel Deutchland has 8 million subscribers.
Vodafone said this spend will occur across its European MSO assets. This will force Virgin Media (controlled by Liberty Global) to reciprocate. Better times may be coming for CCUR. Or it may get bought out, given its strategic position.
From the Guardian:
Vodafone plans to wade into the UK pay-TV business, in a move that would further shake an industry reeling from BT's £900m swoop for the rights to Champions League football.
The plan is high on the agenda, group chief executive Vittorio Colao said at the company's half-year financial results on Tuesday.
"We will offer unified, converged, multiscreen services in all countries. What that will look like in Britain I don't know yet," Colao said. "We have a new chief executive of the UK starting and they will help develop the strategy … I will be doing a lot of thinking in the next few months about the impact of telecoms companies owning content."
Vodafone has earmarked £19bn to upgrade its networks over the next two years, £7bn of which will come from the sale of its US business, Verizon.
Promising "perfect voice" services with 50% fewer dropped calls and the best 4G mobile internet services in Europe, Vodafone said it will invest £1.2bn in the UK, including £300m of Verizon cash. Its efforts will be focused on London, with £150m spent improving coverage in the capital.
"We really can make a difference in a way that our competitors cannot catch up on," said its finance director, Andy Halford. "We want to create some blue sky between us and the rest."
Verizon cash is also being used for a bumper shareholder payout and to reduce debt. Vodafone will use its stronger balance sheet to fund more acquisitions. Some of those are expected to be in the pay-TV arena.
Sentiment: Strong Buy
From the CC, the bonus provisions to management is $7 million for every dollar of stock appreciation. This resulted in a $22 million dollar charge last Q, which otherwise would have made the Q profitable. This management compensation hit to earning decreases in 2014 and ends in 2015.
Since the stock is down $1.25 from yesterday's close, even if RDN's stock rises to get back to $15 by next Q earnings, RDN is looking at not paying the $22 million expense next Q,
I'll be looking to bet back in with any further downdraft due to an overall market correction.
That being all said, where do I stand now.
- At yesterday's closing price, CCUR is paying a handsome 6.5% dividend, highest of any tech stock out there. You get paid to wait for next Q to see if the revenue growth stream has legs. And that dividend yield is insurance if the stockmarket finally has a meaningful correction and stockholders suddenly rediscover that being in the market has risk.
- CCUR is not expensive, especially relative to competitor SEAC. Not much in the current market is a bargain anymore. I am only 10% long the market and raised my ETF shorts to 20% with the rest in cash.
- Where we stand right now, CCUR is a safe buy to $8 and speculative buy to $10. There is no analyst coverage right now; management's complete lack of transparency over the years have killed that. Stock may be on sale today at a good price, as there was no analyst benchmarket to show a revenue or earnings beat. Does anyone even know about a good quarter if there is no analyst covering it?
I will add to CCUR position if there is no meaningful liftoff at the opening bell.
The dividend bump was uncharacteristic of CCUR's too conservative management style. There would have to be something in the pipeline to support it. Given the current ($5.3 million order) and the new CDN deployments in North America, steady JCOM revs. and the potential for new multiscreen revs from Virgin Media and Kabel Deutschland (in the competitive fight between Kabel's parent Vodaphone and Virgin Media's parent Liberty Media for the European customer), there is the real potential revs. to increase in 2014.
There may be genuine justification for the dividend bump in CCUR.
Lastly, I have yet to see management sell any meaningful shares of stock they have accumulated over a period of years.
From the 10Q, you will see that the bump this Q has much to do with a large order ($5.3 million) from a North American MSO, whom was responsible for 31% of total revs. this Q. That same MSO was less than a 10% customer this time last year. Has to be either Time Warner Cable or Cox.
Good news is the announcement of the new CDN deployment for a top 5 North American MSO might be someone else, who is not that big customer order. That could be COX, but then again, it could some other MSO.
JCOM, which has deployed CCUR's multiscreen solution is a very steady customer delivering $3 million in Q from Japan.
Europe only delivered $950k in revs this Q. CCUR supposedly has big contracts with Virgin Media and Kabel Deutchsland, but those MSO vendors have yet to spend meaningfully. Perhaps that might be in the pipeline? After all Europe has been mired in a recession for quite a while due to the governmental debt problems in Southern Europe. And Vodaphone, new parent of Kabel Deutschland and its 8 million cable subscribers, will soon be getting a huge check for $135 billion from Verizon for its wireless stake. Before that merger talks with Vodaphone, Kabel Deutschland had plans for $350 million capex spend, including VOD, which was postponed. Could be back on now, with Vodaphone competing with Liberty Media for control of the European cable customer.
Preliminarily, I have been in and out of CCUR. Have a good handle of company and stock performance going back about 3 years. Sold half a position after the disappointing last Q at $8.25. At that time, expected much more because of the doubling of the dividend two months earlier to .12, which created an expectation of revenue growth, particularly after several contract announcements with European MSO's, including most recently Virgin Media. Also, hopes of CDN deployments for Time Warner and Cox.
This Q was more in line with the dividend bump. Revs. meaningfully increased to $17.2 million. VOD revs. hit $10.1 million (for the first time in a long time) up from $8.6 million and Real Time revs. also increased from $6.3 to $7.1 million. The Real Time revs. increase is part of the reason for the decrease in gross margins, which is not a problem.
One thing I did not care for was the bump in performance compensation to management from $168K to $391K YOY. Yes, the stock price is up from last year, but that is because CCUR's management had no clue what it was doing for shareholder interests, hoarding huge sums of cash (at one point $30 million, when the market cap was $36 million) and paying no dividend for years (until this past year). Stock price is higher, but that was because it was depressed due to management's failure to meet reasonable investors' expectations.
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Yes. New customer. And 3 1/2% drop in gross margins. Could that new CDN MSO customer be Comcast? Just trying to connect the dots.
FYI, don't look for CCUR to give future guidance, even if the earnings report is a good one. They never provide earnings guidance for future quarters.
Recall press release on Virgin contact announced in March. $64,000 question is when this contract gets implemented and revs get recognized.
CCUR has had several contract announcements with European MSO's the last 2 years, Kabel Deutchland, Virgin Atlantic and Polish MSO, but no material revenues have resulted as of yet. I recall the last 10K saying European revs were only $2 million of the $16 million Q in the last earnings report.
That is what makes the large dividend bump in July so interesting. I recall calculating that CCUR will need to generate an additional $1 million per Q, just to pay for the dividend boost. That makes the move a very risky one for a risk averse management.
There is no way to know. CCUR management never provides guidance and you don't see revs and where they came from (in the 10K) until the earnings report is released.
The only hint is the doubling of the dividend from 3 to 6%. Given how conservative and risk averse CCUR's management is with respect to investor relations, this huge dividend bump was an uncharacteristically "big risk" move. If it fails, CEO Mondor will be toast and looking for a new job.
Since Mondor has implemented the CCUR board's risk averse philosophy these past 3-4 years, I interpret the bold move as a sign of better things to come for CCUR, particularly with regard to CDN and multi-screen adoption by MSO customers. Recent contract win announcement of Virgin Atlantic in March provides substance to my theory.
Moreover, If this quarter was going to be merely OK, the prudent thing for CCUR to do would have been to delay the dividend boost announcement to today upon the release of earnings. This would have ensured a stock price bump after the bell. Instead, CCUR elected to double the dividend in July (halfway through the Q).
I could still be wrong. CCUR's management could simply be idiots, intoxicated by the stock price bump generated by previous very positive dividend announcements. We'll know the answer by 5:30 PM today after the earnings call.
Too bad the Syria news took the wind out of the sails.
Appreciate the mention, Truth.
Bought back my sizable position in CCUR at $7.60-$7.70 range on the dividend announcement. Have not sold a share since. If the earning's report validates the dividend bump, we'll see double digits.
As far as the broader market is concerned (very relevant), this rally can continue run to Labor Day. The "bad news" is "good news" keeps fueling the market higher. But I'm not so certain that September and October will be so forgiving. Up so much since last Fall, I am now largely in cash right now. Will only day trade for now. CCUR is my lone holding over the intermediate term.
Ledbed, is that your reason.? CCUR has even had a huge "Ledbed pop" yet. Doesn't the stock have to explode to the upside first before your "Ledbed Put" kicks in?
Have you ever given any consideration that a mere $80,000 of additional earnings equals .01 a share profit for CCUR?
Yes, if CCUR earns $800k more than last Q, we're looking a .20 earnings blowout. Would make CCUR cheap at $8 on earnings and a 6% dividend.
Have you considered that Cable MSO Capex spending has been flat for about 5-6 years and, just maybe, is cyclically beginning to pickup. Now, CCUR has added several new European customers to its base, including Virgin Media. Kabel Deutschland merger is finally done and it can now start multiscreen implementation that was to start in mid-2013 (per its October 2012 presentation)? That the dividend raise may be simply be a recognition that revenues are about to pick-up?
Why would anyone short a company that just raised and doubled its dividend to 6%? I would think there is a big laundry list of better short candidates: companies who's good news is already out and now fully priced into the stock.
So your whole thesis for shorting CCUR is Ledbed? I could see a macro argument that the overall market is in a topping process, but Ledbed????
How can I focus on that when management, less than two months ago, doubled the dividend, which is now 6% as of today? Did management do that for Ledbed???
Why are shorts, so often, so intellectually weak? I guess the smart ones never post. Kind of ironic that you bash (a negative pump) CCUR on Ledbed, when he does the same on the opposite side of the mirror.
I am net short the overall market, but long CCUR. Nothing signals improvement and confidence like an enhanced dividend. And CCUR did not have to borrow money to do it.
Actually, Cascade will move the bank deposits and loan accounts from two of the BankAmerica banks that will close and open a single new branch in Klamath where they do no have an existing presence.
Less acquisition costs. Here is a summary of the deal:
he ongoing Oregon bank consolidation and branch shuffle continues.
Bend-based Cascade Bancorp, which owns Bank of the Cascades, said late Monday that it will buy or operate three branches from Spokane's AmericanWest Bank. The branches in Klamath Falls, Bend and Redmond had been owned by PremierWest Bank before AmericanWest acquired the troubled Medford bank last year. That merger was finalized earlier this year.
Cascade said it plans to close the AmericanWest branches in Bend and Redmond and move the deposits and select loans to nearby Bank of the Cascades branches. Regulators in March lifted a three-and-a-half-year-old order for Cascade Bancorp to shore up its finances.
"In banking today it's really important today to focus," AmericanWest chairman and chief executive Scott Kisting. "Those three branches were not near where our core businesses were."
"We're very, very strong in Bend and Redmond," Cascade chief executive Terry Zink said. "Klamath Falls is an area where we believe we can do a decent job."
The transaction, pending regulatory approval, is expected to close in the fourth quarter. Afterward, AmericanWest will have 109 branches in five states; 14 in Oregon. It's been closing branches in Utah, Washington and Oregon and purchasing branches in California, Kisting said. Cascade will have 22 branches in Oregon and 33 systemwide.
Sentiment: Strong Buy
Three new bank branches added today within their core Oregon territory, increasing the number to 16, when the acquisition closes in Q4.
Terms of the sale are undisclosed, but sufficed to say I would venture a guess the acquisition was on favorable terms to Cascade.
AmericaWest Bank (recently merged with PremierWest Bank), the seller, with 31 branches in the Northwest, is selling non-core bank branches after emerging from bankruptcy.
That Cascade now has the means to become an bank acquirer, as the market finally turns and the yield curve steepens, bodes well for a long-term recovery. Real estate market is in Cascade's territory is also better than much of the rest of the country improving collateral and helping to wipe the slate clean.
Have become meaningfully long in CACB at $5.80 a share.
Sentiment: Strong Buy