Sunday, June 15, 2008

Weekly recap - Analyst Day

The stock closed the week at $5.46, losing 7 cents or 1.3%. The markets were mixed after a torrid rally on Friday. Here are some of the UT related news for the week.

Short interest - As of May 27, 2008, short interest rose 5.3m or about 25% to 25.56m. During this period, shares pulled back to the mid $4 level and have subsequently rallied to the mid $5s. Since the report is 2 weeks delayed, the short interest level may have gone right back down during this rally. We'll check back on this in a couple of weeks but it is worth tracking because of the huge increase and the corresponding price increase.

Divestiture of MSBU - See Monday's posting on this. On the following day during the analyst day meeting, management mentioned that MSBU had $30+ million in revenue and operating expenses of about $20m/year. I was contacted by an "unverified source" that mentioned revenues were higher than the $30m and that the business unit was profitable. In any case, it is good that management is following through on their stated goals of reducing opex and focusing on the best opportunities.

New China Executives - Aside from Peter Blackmore formally becoming the CEO in July, a couple of other promotions in China. Ying Wu's brother (just kidding), Robert Wu will be the China CEO and Manfred Loong will be the China COO. I am Chinese myself but selecting "Manfred" as your name :-) Seriously, good luck to both of them and thanks to Hong Lu for stabilizing the China situation during the last year.

Analyst Day meeting on June 10, 2008 - I posted on this as well yesterday but would encourage people to listen to it in its entirety. The company website has put together all the conference/update calls dating back to Aug. 1, 2007 (when the stock price was about to break $3 for the first time). That collection of calls can also be seen as the Peter Blackmore-turnaround era and started the flow of information to shareholders once again after about a year of silence from the company. Very nice website and resource for shareholders. As I mentioned, it now gives investors a "fair chance" of evaluating their position and making an informed decision (which was something that was taken away during that period of silence from the company - something you know I have been bitter about).

PCD - Another comment I wanted to make about the Analyst Day meeting was the lack of discussion on the PCD side during the presentation. In fact, the company made it a point of modeling the company without PCD. While I understand the company's focus is on iptv, ngn, and broadband (something we investors would like for the future and something the company has an advantage in technology and can differentiate themselves), why wasn't there a major presentation of the PCD??? The PCD currently makes up $1.8+B of the $2.5+B of revenues expected for 2008. It has an operating profit of $86m! I have been focused on the valuation and shareholder enhancement and in order to attract attention to the company, PCD has to be front and center at this stage. As I mentioned on yesterday's posting, will I be excited that the core business is losing gobs of money, currently only growing 10%, and won't be profitable for 2 or 3 years? Why not have P. Christopher (head of PCD) do a presentation on the growth of PCD, margin improvements, clients, products, market share growth, comparisons with Motorola, etc. What about impact of Verizon buying Alltel?

I know its the analysts job to highlight valuation but put up a chart showing value of real estate, net cash position, projected value of PCD, revenue of core businesses, p/s, etc. Believe me, I "appreciate" the honesty of the difficulties in iptv at this stage and lowering costs, etc but in an Analyst Day meeting, you have to highlight the current strengths (and that is not the management/BOD but the PCD and valuation). As I mentioned, I cringed about the continued losses projected for 2008 and the model without the PCD ($130m loss!). The people asking questions about the PCD and growth potential of iptv (and ngn) and others were people who already OWNED significant chunks of UT (he he). They actually did a better job in trying to pull out the good information. Seriously, I already know there are good engineers and products (I would hope so if you are spending the kind of money the company has for years and years) but I want to see PERFORMANCE. Why not show their net cash position as a percentage of market cap and compare it to other companies? Why not bang the heads of people on PCD and its potential value? Its great to show their customers are benefitting but what about shareholders? Its nice to know they customers will get a payback after two short years. We shareholders know the customers have been benefiting and we have been suffering.

Best post of the week - This definitely goes to Salisburygo for his minute by minute summary of the Analyst Day meeting. Most people don't have the time to listen in specially 3 hours during the work day and he did an excellent job conveying the main points (although biased, he he). Get a life Salisburygo! (he he)

The company mentioned there are more road shows to come this year and as a shareholder I do appreciate the information and sense the company has confidence for better performance down the road. I want to give the management credit for the recent increased in share price but it is really way too early to celebrate so I remain an optimistic critic of management and the board. Happy Fathers Day to all the fathers out there. I've got reservations at the Black Angus tonight (woo hoo). After the tooth extraction I had last Monday, its going to be good eating tonight.

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