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JDS Uniphase Corporation Message Board

rspiland3 55 posts  |  Last Activity: Dec 8, 2013 1:08 PM Member since: Feb 23, 2012
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  • rspiland3 rspiland3 Aug 22, 2012 7:01 PM Flag

    Fyi for traders waiting for a deal: I have communicated to management that I will vote my shares "no" against any deal under $1.5 bil. OCZ's communications suck, but they are growing the company quite well. Guidance of $630-$700 mil does not include any SAN Replacement revenue, although MSFT and other deals could contribute several hundred mil in the second half of the year...I think F2013 revs and eps will exceed $900 and $0.60 per share. Next year growth will continue at a blistering pace. My CF model suggests they do NOT need additional financing. So why would I sell at a discount right before all this investment pays off?

    As part of STX or WDC, OCZ could easily generate F2014 revs of $1.5-$2.0 bil with a 10-15% net Margin. In fact, they can probably do that on their own. So a $1.5 mil deal would be accretive within a quarter or two. You can bet Steve Luczo knows this too.

    So my advice is be patient. The shorts are overstaying their welcome on this one; stock will be a LOT higher in a few months, with or without a buyout.

  • Reply to

    Why USAA sued MITK....

    by runmitk Apr 12, 2012 7:11 PM
    rspiland3 rspiland3 Apr 12, 2012 7:56 PM Flag

    This is a great summary...thanks. I will add a few thoughts. First, MITK has told me that USAA is running on a first-generation platform; no one else is on that platform. My understanding is they have been trying to migrate USAA to the later-generation technology for a while...It didn't just happen overnight. But when negotiations failed to progress, DeBello sent a strongly worded letter instructing USAA to stop using the existing software.

    Second, the proposed $2.5 mil license fee is for a 3-year license. They also requested USAA pay a 16% annual service fee. As USAA processes about 15 mil mobile check deposits a year, this translates to around 8.2 cents per transaction. This was a below-market offer. And the fact that USAA disclosed payment information is part of the grounds for MITK's countersuit.

    I agree that this could be a big deal for USAA if it goes against them. And I suppose it would be better for all if they settle. But USAA has done material harm to MITK and its shareholders, so I am not so sure a settlement should be generous to USAA.

  • Reply to

    What is the fair market value of OCZ?

    by leestoops Aug 25, 2012 6:35 PM
    rspiland3 rspiland3 Aug 26, 2012 4:44 PM Flag

    I have communicated to management that I will vote "no" against any deal below $1.5 bil, or roughly $21 per share.
    Although OCZ communications suck, they have managed the company quite well. Spending on sales & marketing, R&D and inventories have been elevated in anticipation of a ramp in SAN Replacement (Z-Drive R4, etc.) revenues. But guidance of $630-$700 mil in revs for F2013 includes zero...nada, zippo, zilch...in SAN Replacement. They called it "conservative." One of the reasons people want to short OCZ is because you can't reconcile spending with current guidance.

    They already have completed SAN Replacement qualifications with MSFT and others, which will likely generate several hundered million over the next few quarters. I think OCZ will ultimately print over $900 mil in revs and around 60 cents in earnings for F2013. My model suggests they do NOT need additional financing to hit these numbers. In F2014 they can do at least $1.5 bil in revs; with an 8.5% net margin that equates to eps of $1.80. (I think they can actually do much higher, if they can manage this growth trajectory.)

    So the stock should be worth at least 1X next year's revs and 12X F2014 eps. And why sell the company at a discount right before all their investments begin to pay off? I would suggest investors be patient with this stock; deal or no deal it should be much higher within a few quarters.

  • Reply to

    Question(s)

    by m_haverland42 Aug 31, 2012 1:10 PM
    rspiland3 rspiland3 Aug 31, 2012 4:44 PM Flag

    Here are a couple of thoughts on your questions: First, Theo Valich at Brightsideof the news kicked off the merger rumors. They were picked up by Fudzilla, the Register and others, but he was the guy with the "inside scoop." He followed up with a date AND a price, which was a pretty good sign that neither would be correct...lol.

    Second, the Barefoot 3 is OCZ's first proprietary controller since buying Indilinx, and it should be a high margin product. So yes there is credibility and money riding on that product.

    However, I think the Z-Drive R4 PCIe product is a more immediate catalyst. It has been in trials for a year, got rave reviews, and has been qualified at MSFT and others. Most important this so-called SAN Replacement business is not included in current $630-700 mil rev guidance for F2013. I think this business could add several hundred mil to F2013 revs, and margins are over 50%. My F2013 estimates are $918 mil and $.60 for revs and eps respectively. I do NOT think they need additional financing to hit these numbers. And if they can manage the big numbers, I think they could do revs north of $1.5 bil in F2014.

    Regarding merger talks, there are over 400 companies making SSDs and components, and it's a fair bet that everyone is looking at everyone else. An STX/OCZ combination makes tremendous sense, and would be accretive within a quarter or two. But I have communicated to OCZ management that in light of my expectations over the next 2-4 quarters, I will vote "no" against any deal less than $1.5 bil. OCZ has the broadest product portfolio, the biggest sales volume, their own proprietary controllers, their own Flash Translation Layer, and their own Adaptive DSP technology. They have been first to market in almost everything they do. And most important, the investments have already been made. So I'm not a seller until we begin to see some results. I expect the stock to be much higher within a couple quarters, with or without a buyout.

  • rspiland3 rspiland3 Jun 22, 2013 11:23 PM Flag

    My estimate for the coming quarter is $4.027 mil, based on 35% sequential growth in software revs and 4% growth in services. I also think F4Q will be over $5 mil, and F2013 revs will exceed $15 mil. If anything, these estimates are conservative. Street completely missed the revenue lag between contract signings and deployments last year, so everyone is gun-shy with the estimates. But over half the signed banks have now deployed MRDC, and the service is wildly popular with end users. MPBP is impossible to model, but definitely won't hurt. The question is when they reach profitability. If they get Sales and Marketing down below 30% of revs and R&D below 35%, I think maybe they could break even on a non-GAAP basis in the 4Q. F2014 revs should more than double, and we should be solidly profitable each quarter. It's a shame the Street didn't stick with MITK, because it's really starting to work.

  • rspiland3 rspiland3 Dec 8, 2013 1:08 PM Flag

    Jefferies had been recommending a FNSR short based on long-term concerns about silicon photonics. Specifically, CSCO and others are known to be working on technology which would enable them build silicon photonics-based componentry in-house rather than outsource. Problem is that technology won't be commercially viable for several more years, and the migration to 10G/40G/100G is happening now. And by the time silicon photonics is commercially viable, FNSR will likely have a presence. Jefferies finally upgraded to neutral after the last Q beat expectations. Irony is that I heard they had recommended JDSU long as a paired trade...ouch!

    As an aside, Goldman raised his target to $27 Friday, but maintained a neutral rating as the stock was trading over $23 premarket. Friday's close at $21.82 represents 24% upside to GS target, so I wouldn't be surprised to see an upgrade. My own target is low-mid $30s within 12 months, based on 15-16X F2015 estimate of 1.85, excluding $3.05 cash on the balance sheet. Hope that helps!

    Sentiment: Strong Buy

  • Reply to

    $28 price target

    by dalmations103 Feb 21, 2012 5:54 PM
    rspiland3 rspiland3 Feb 23, 2012 12:20 PM Flag

    I will add one additional thought. I have owned and followed OCZ for almost a year. In that time, Petersen, Knapp and the OCZ team have done a great job growing this company. Each initiative has been well-conceived, meticulously planned and flawlessly executed...they haven't screwed up once! I think most investors don't realize how hard it is to manage this type of growth without looking like you're careening off the guardrails. OCZ management has not only managed the current business, but has also positioned it well for the future. Can't ask for more than that from a management team.

  • Reply to

    $28 price target

    by dalmations103 Feb 21, 2012 5:54 PM
    rspiland3 rspiland3 Feb 23, 2012 11:52 AM Flag

    Still a buyer of OCZ with a $28 target. Finding support on a trendline just below $8.50...nice entry. Concerns about competition from SNDK, MU and others are overblown near-term imo, because industry growth is so fast.

    Core SSD business will indeed become commoditized over time, as all fast-growing hardware businesses do, but what differentiates OCZ is migration up the value chain. The Indillinx, PLX and Sanrad aquisitions boost the software component of their business mix, enabling them to compete in the Storage Area Network (SAN) replacement market. This is a huge market with little competition where pure hardware companies just cannot compete effectively. The reason FIO trades at 6X revs is because their solution (1) has rapidly growing demand, (2) has 50%-plus margins, and (3) has little competition.

    With the Z-Drive R4, OCZ is now competing in that same market. I think they are competing effectively, and estimates are probably too low. So 2.7X C2012 revs and 20X C2013 eps is not overly optimistic, in my opinion. The risk that concerns me most is that someone like MU steps in and buys the company at a 40-50% premium, and I miss out on a high probability 3-bagger.

  • Reply to

    Is the exercise priced in?

    by diwannewyork Jul 3, 2013 2:57 PM
    rspiland3 rspiland3 Jul 3, 2013 6:50 PM Flag

    Yes. It's a legal method for underwriters to stabilize new issues by shorting up to 15% of the issue on the offering. If a weak offering breaks the deal price, the underwriter can then support the issue at the deal price without losing money by covering that short. In MITK's case, the stock didn't break the deal price, so the underwriter can cover the short by exercising the over-allotment option. Google "Greenshoe" for a full description. This deal went fine; just needs to digest the new shares and wait for earnings.

    Sentiment: Buy

  • Reply to

    Secondary Offering

    by steevee48183 Jul 1, 2013 4:24 PM
    rspiland3 rspiland3 Jul 1, 2013 4:42 PM Flag

    Company has already issued a press release and filed a prospectus...what exactly do you want? The deal went fine, as evidenced by a decent bounce in the stock. I'm confident the stock was well placed with long-term growth investors and not traders and shorts. Cash is to be used for general purposes, financing receivables, litigation expenses, etc. Recall they have guided to $3.3-$3.7 mil revs and $5.5-$6.0 mil costs and expenses, plus legal expenses in the F3Q...they are still net users of cash. So they would need cash sometime anyway.

    Also, this deal gives them "staying power" in the USAA suit. And if USAA expected this suit to impair MITK in any way, it's clear that strategy hasn't worked. This cash, combined with MITK's success with mobile deposit and growing traction with other products, would make a settlement all the more attractive to USAA. In any case, the quarter is over, and the quiet period has begun. Don't expect any more commentary until earnings. But relax...MITK is probably going to double revenues for each of the next 2-3 years. Stock will be much higher if that happens.

    Sentiment: Buy

  • rspiland3 by rspiland3 Feb 20, 2013 5:24 PM Flag

    are making too much of this increased share authorization and the insider sales. Share authorization was in the proxy filed Jan 14 and discussed on the earnings call Jan 31. Yet the stock ran from $3.30 to $5.00 over the next 2 weeks. Anyone who sold today because of a new share authorization last month would have to be an idiot, and we certainly don't have any of those on this board.

    DeBello's sales probably didn't even cover the tax bill for his exercised options. Don't forget, when you exercise employee stock options, you get taxed on the difference between exercise value and market value even if you don't sell. So Debello incurred around $2.1 mil in taxable income, but sold less than $700k worth of stock. Yet he chose to double the size of his holdings. Other directors have exercised and held the shares in the past few months, suggesting insiders do not expect imminent doom.

    Mitek is an early stage growth company. The fundamentals are fine...the company is getting new business, transactions are growing 25%-plus sequentially, and the new MPBP product appears likely to gain traction with large banks. But it's a long term story. I expect profitability over the next 12-18 months. But the most exciting catalyst for the stock is when transaction growth and revenues begin to converge, and that probably happens this year.

    To me, the most likely reason for today's swoon was the unwinding of a technical trade which started last week and had a target of $5.00. It was a good trade for a nimble trader. But the long-term investment case for MITK remains intact.

    Sentiment: Strong Buy

  • If OCZ was going out of business, it would already be gone. Now they've taken out a lot of costs, introduced great new products, and signed collaborations with NTGR and MLNX in the enterprise segment. I always thought OCZ was undervalued relative to sales and IP, if only it could survive and prosper.

    So now WDC bought troubled STEC for over 2x sales net of cash. MU and STX have to be watching! If STX buys OCZ, MU is in trouble with its Crucial SSDs. So what's it worth? If revs are $250-300 mil, 2Xrevs would be $7-$9 per share. Looks like a pretty good risk/reward profile to me...

    Sentiment: Buy

  • Reply to

    Q4 Positive Operating Profit?

    by mwhummel Nov 28, 2012 11:29 AM
    rspiland3 rspiland3 Nov 28, 2012 1:43 PM Flag

    Without 2Q or 3Q numbers, it is obviously difficult to make accurate projections. But I think there is a reasonably high probability OCZ prints a positive (non-GAAP) eps number for the 4Q F2013 (this coming Feb) quarter. I assume significant inventory write-downs in F2Q and a few more in F3Q. Moreover, I am assuming a $50 mil capital raise in F4Q (45 mil shares at $1.10) But enterprise revs and Vector should make a strong contribution in 4Q, and Z-Drive R4 Gross Margin should still be over 50%. I am forecasting $158 mil in SSD revs in 4Q with a 33% blended GM and 113 mil shares (vs 68 mil last Q.) This equates to a positive 13 cents per share report for the F4Q.

    Caution: All numbers were obtained using the rectal extraction method. But I think they make sense.

  • Reply to

    investing in OCZ

    by nytessr May 11, 2013 9:42 AM
    rspiland3 rspiland3 May 12, 2013 12:11 PM Flag

    Thoughtful post, and definitely the most substantive post I've seen on these boards in a while. I too have suffered with this pos for way too long, and I agree with almost every word. Whenever it seemed it couldn't get worse, it did! And the problem was dishonest and overly aggressive management. Now the stock is useful mainly for tax losses. The earliest tip-off should have been the #$%$ board of directors...

    What kept me in the stock was the IP...it's still excellent, and it's worth far more than the market value of the company. And I continue to hope OCZ's more focused strategy, and particularly the enterprise effort, enables the company the company to emerge from it's death spiral. However hope is not usually a winning investment strategy...

    I have long believed the endgame is sale of the company. After all, the hard drive industry is now an oligopoly with wonderful production capabilities and excellent pricing power...WDC and STX are the natural players to ultimately dominate the SSD business. But first OCZ has to survive! Otherwise the buyers will simply pick over the bones in bankruptcy court.

    Kudos to the shorts for recognizing the headwinds; and good luck to the longs for their patience with a once-promising little company.

  • rspiland3 rspiland3 Jun 23, 2013 1:23 AM Flag

    I have to admit that using decimals in the forecast is kind of a joke. But I've built a model which captures (1) what little we know about transaction growth and revenue per transaction, and (2) migration toward industry average expense ratios. With 25%-plus transaction growth and 90%-plus gross margins, this company can print money in just a few years. Your $18 target is easy. Thanks for all your valuable info!

  • Reply to

    court case

    by jpnmqrtn Jul 17, 2013 8:52 AM
    rspiland3 rspiland3 Jul 18, 2013 10:55 AM Flag

    Nice post, but I would offer a few additional thoughts. First, it's important to note that the USAA point man on the MITK relationship left USAA to head IT for another bank shortly before the contract was up for renewal. (One of many disgruntled managers to leave under the new management, I'm told. He also contracted with MITK almost immediately after joining the new bank.) I think the cost of migrating USAA to the next generation platform was more than $400K per. I heard it was more like several million, and the new liaison simply kicked it upstairs.

    MITK actually tried pretty hard to settle early...even replaced the head of sales in an effort to be accommodative. But attempts at settlement were one-sided, so MITK retaliated with charges under the Lanham Act.

    My view is that it was better to do the offering before the hearings ramp up this fall. Recall that hearings are scheduled for November. In the meantime, the additional $15mil gives MITK the horsepower to "go the distance" against a much larger company. If USAA thought they could impair MITK's business in any way or that MITK would simply roll over and acquiesce, then it's clear that they overplayed their hand. Because MITK's product is wildly popular with users, and the added cash ensures MITK can afford to pursue its own counter-charges. I think USAA has much more incentive to make a more accommodative settlement now that MITK has additional cash.

    Sentiment: Strong Buy

  • Reply to

    Earnings History for MITEK

    by bbondslf25 Jan 23, 2013 2:46 PM
    rspiland3 rspiland3 Jan 23, 2013 3:46 PM Flag

    Transaction growth is over 25% sequentially, and it has been accelerating. They have only released this metric for the past 2 quarters, but it is VERY significant because of the way the recognize revenues.

    They sell blocks of transactions to channel partners, and book the revenues up front. Channel partners in turn sell to banks, who then begin systems integration which lasts around 6 months. Once the bank completes systems integration, launches the service and uses the transactions, they have to reload. So sales were pretty strong when they sold initial blocks of transactions, but went flat during systems integration and initial launch. As of last Q, they had 544 signed institutions, but only 205 had yet launched the service. As more banks launch, use their transactions, and return to buy more, the transaction growth and revenues will converge.

    That probably won't happen this Q, but it will likely happen this year. So estimates in 2H are likely too low. Plus, USB and JPM should be launching Mobile Photo Bill Pay soon, which provides a new revenue stream. Probably a double-digit stock by year-end.

  • Reply to

    MMs used to make it move up to get sales

    by mtheis17 Jul 22, 2013 9:42 AM
    rspiland3 rspiland3 Jul 22, 2013 11:16 AM Flag

    What a strategy! Makes way too much sense. I like people like dow and mtheis though, because they give me buying opportunities even though all the new information is positive. Oh look, I may have just bought the last of mtheis' position ahead of the earnings catalyst... lucky me!

    Sentiment: Strong Buy

  • Reply to

    Vertex 4 - 512 GB - New version

    by mohasat Aug 31, 2012 10:44 AM
    rspiland3 rspiland3 Sep 1, 2012 11:27 AM Flag

    .M stands for Micron Nand vs. Intel. Performance and price of the .M are both slightly lower. Both versions are widely available. OCZ's marketing staff is aware of the confusion and is trying to clarify with resellers. There was a thread on OCZ's forum a while back on this.

  • Reply to

    Just wondering

    by domino54 Dec 17, 2012 3:55 PM
    rspiland3 rspiland3 Dec 17, 2012 5:39 PM Flag

    There isn't enough information to make that decision! Schmitt sounds like he is getting OCZ's cost structure under control, and he has implied that the enterprise business is starting to expand. Their enterprise products have had great reviews and 50%-plus GMs. And thave been in trials for over a year (normal is 12-18 months.) With better cost controls, a more focused suite of products, and a decent enterprise presence, revs could easily exceed $750 mil in 2014, with a 34% GM and 55-60 cents in non-GAAP eps. These numbers would suggest a $4-5 buyout would be too low.

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