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
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.
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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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.
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.
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.
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.
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.