http://investor.vitesse.com/releasedetail.cfm?ReleaseID=859422
Posted by phobos - 12 years ago | Updated 12 years ago
Please let there be significant top-line growth...
Posted by phobos - 12 years ago | Updated 12 years ago
Forget the IoT, Intellisec, the cloud- It's the day of reckoning for CRG. Talk is cheap- get your head out of the cloud and deliver some top-line growth!
Can you really blame your shortcomings on China any longer.
Posted by Techinvestor - 12 years ago
you are all absolutely correct! we have been fed the ultimate BS line for many years now. The upcoming Q3 of 2014 Is supposedly CEO Gardner's time to bring a significant change to the positive in terms of REVENUE.
Q2 CC-
" We see strong new product revenue growth in Q3 as well "
" At the beginning of the year we set a target of reaching non-GAAP profitability in Q3- and we still expect to be at or near that target "
For new investors coming in I believe CEO Gardner had better be producing a revenue target above what he has been promising.
Posted by christ3opher - 12 years ago | Updated 12 years ago
Anyone care to site a number (revenue) they would be happy with. For me I can't believe there will be any top line growth, at least nothing meaningful.
March of 14 revenue was $25.6 million. June of 13, one year ago, revenue was $26.4 million. For my money anything short of $30 million is an abject failure. That would be 13% growth over last year, the bottom range of the term "ramp" and nothing near the beginning of a "hockey stick". This by the way is the oldest and most unfulfilled prediction in the history of finance. Virtually no informed investor ever believes in the "hockey stick." Most professional investors take this as an open, however unknowing, recognition of management that their revenue predictions are in big trouble.
Reference to "hockey stick revenue growth in the last half of the year" ranks right up there with "you can keep your doctor", "I did not have sex with that woman" and "I will never resign". It is sickening.
Gardner just needs to be fired, period. Just fire him and let Vitesse move on.
(I'm more than a little frustrated. You may be able to tell.)
Posted by dlog - 12 years ago
Why is Gardner needing fired so obvious to us but not the major holders like Raging Capital and Kopp? And I'm sure his goals for his bonus aren't important things like revenue growth & profitability. Probably some easily attainable things like attend conferences, maintain metrics, have staff meetings.
Posted by Techinvestor - 12 years ago
BM has two people on the board calling the shots, which is two more than we have Tech. If CRG doesn't listen, then BM takes his stack of money, goes home, and VTSS returns to the sub $2 range, or worse. For this reason, BM has CRG's ear.
I think BM is fixated on the top-line growth in new product revenue, which I believe has been good so far, although it has not completely offset the decline in legacy products leading to stagnation in the total top-line unless and until the composition of the top-line becomes mostly new products.
I'm thinking we will see somewhere between $26~27M in top-line product sales with perhaps some IP also contributing to the top-line, and in combination with debt retirement letting more top-line flow to the bottom-line, could get VTSS very close to break-even for the quarter (next Q?).
Yes, I'm continuing to drink the Kool-aid.
I don't think we hit $30M (product sales) until Q2 '15, but after that, I think the top-line growth will accelerate, if the new product growth rate can be maintained.
Posted by phobos - 12 years ago | Updated 12 years ago
30 million is a must do for this Q! we're talking $1.5 million above the low ball estimate for the quarter. It's time to deliver on 'self imposed" promises.
2012 design wins(if they weren't over-blown) should be paying off on the heavy side right about NOW!.
31 MILLION plus raised guidance would drive this thing closer to $5! but why do I get the feeling excuses will be the order of the day??
Posted by GARIF - 12 years ago
I think that the "analyst estimate" includes IP. Who knows? IP has been so variable, who could even guess? I think all CRG said about the quarter was that vtss would, or would come very close to breaking even. I think that will be a combination of top-line increases in new product revenues and whatever the IP amounts to, and the savings from managing the debt, which could prove substantial. I don't believe he ever said anything about revenue rocketing upward (would I like to see that? - Hell yes!).
Although, with all the new markets for vtss' products (some are even new since the last earnings' call!), it will become harder and harder to explain exactly why revenues are NOT rocketing upwards.
I stand by my estimates, fully prepared to be wrong, and joyfully so.
Posted by phobos - 12 years ago | Updated 12 years ago
I agree that the $30M would be what needs to happen to attract the investment community to this pos. Will it happen? by now CEO Gardner should have figured out that it is very very important to do exactly the opposite in what he has been doing over the past ten years, that being to under promise and over deliver. right now Vitesse needs this to happen in a very BIG way.
Posted by christ3opher - 12 years ago
Skyworks solutions (SWKS) even beat RAISED guidance with record profits ( .83/share) and revs. ($ 587 mil)- we can only dream.
CRG needs to study what they are doing besides UPOD, which is obviously great. Ex- VTSSers working there must be ecstatic they jumped ship.
Posted by Techinvestor - 12 years ago
Afterhours trades (4) at closing $ 3.20- that is unheard of except at Earnings time.
Posted by Techinvestor - 12 years ago
Unlike in past earnings seasons, where shares appreciated, only to retrace their paths after disappointing results, perhaps the bleed-down leading in will be followed by a pleasant surprise in revenues and an appreciation of share price after the earnings release.
I'm engaged in wishful and magical thinking, aren't I?
We'll know in a little more than one week.
Posted by phobos - 12 years ago | Updated 12 years ago
phobos- That could be "Fantasy Island" but stranger things have happened. If a stock sells off after exceeding expectations they say "They sold the news"- if it rallys after a disappointment they say it was "already baked in" the price. Let's hope for a rally w/o a disappointment.
On the technical side, we are testing the $ 3 level- if it doesn't hold the next major support is the $ 2.50 area.
Posted by Techinvestor - 12 years ago
at this point, if #'s do come in below or even low end of projected, hang on because it's gonna be a hell of a drop down!
I am wondering was is to happen with the " hockey stick " that was brought up over a couple of quarters. If there is NO " hockey stick " in regards to revenue. This will be another major flaw in CEO Gardner's perception on the business he is in.
Q3 is a tough one, maybe the reason why we have low volume and a "slow bleed " down. with most customers of Vitesse performing very well, why can't we have an exceptional quarter? could Gardner finally be putting on the brakes as far as "over promise, under deliver " ?
phobos, I hate to say it, but I am siding with you, " engaging in wishful and magical thinking ". gonna be a long week!
Posted by christ3opher - 12 years ago
AMCC just reported a miss on Revenues. Stock getting beat up after hours - down nearly 5%.
Posted by Satbob - 12 years ago
Indeed Phobos! Vitesse needs to desperately SURPRISE the world ! she needs to surprise herself! according to Crg's math 2012 Design wins should be ringing $$$$ right now.
million of dollars is sitting on the sidelines waiting for a 30 million plus quarter and stronger guidance into the future to dump this money on Vitesse shares.
More excuses are no longer affordable, we can't hide behind our customers having a tough go of it, friends are doing very well.
Our Soul needs a strong Q3!!!!!!!!
Posted by GARIF - 12 years ago
"We experienced strong demand for our connectivity products while we saw a sharp decline in legacy PowerPC embedded products."
We will also probably hear about the continued decline of Legacy Products but our New Products should more than make up for this... one would think.
Posted by GARIF - 12 years ago
Some back-of-the-envelope calculations...
If VTSS comes in at analyst expectations of $27.48M, then that would give TTM Revs of about $109.03M. Assuming no additional dilution or surprises (good or bad) in the short term, that would place current valuation ((TTM Revs) X (P/S))/(Shares Out), or about $3.20 per share, which is where we are at right now (the market seems to be lowering expectaions given recent price action).
I extrapolated the growth in new product and the decline in legacy products going forward at a fixed rate of growth and decline respectively, and I got $6.40 for Q315 and around $11.00 for Q316. Rounding that down (there will be new competitors and products entering the market obviously), I find I am in complete agreement with DaWiley1's numbers of $5 and $10. I was assuming no dilution in the medium term and that the P/S went to 3 in 2015 and 3.5 in 2016.
But where is the hockey stick?
The short answer: there probably won't be one. The fact is that as new products ramp, revenues from new products will probably be partially offset by declines in revenues from legacy products, unless and until VTSS can enter completely new markets where gains might not be reciprocally offset and the mix between new and legacy products is still around 50/50. But even new products from new markets may not ramp suddenly. The only way that I see a hockey stick occurring is if vtss becomes a market leader in one of its new markets, and it is way too early to tell.
I would look for accelerating growth going forward, but no hockey sticks.
Posted by phobos - 12 years ago | Updated 12 years ago
the problem with the " hockey stick " is, we were told this was going to happen. sounds familiar, doesn't it, which time, the list is very long!!!
during the Q 1 conference call a question was asked:
" what's the trajectory towards $55 million of new product revenue for fiscal year 2014 "
CEO Gardner response: " characterized as a traditional hockey stick "
during the Q 2 conference call a question was asked:
" what needs to happen for the second half of the year to hit the $ 55 million new revenue target ?, obviously would imply some hockey stick pattern in revenue. "
CEO Gardner makes NO mention at all of a " hockey stick " pattern in revenue occurring, instead we hear " remember it takes our designs between four and five years until seeing revenue ". back to the usual BS.
What the hell was his reasoning behind using the phrase "hockey stick" anyway?????? when is the last time has anyone heard of the phrase " hockey stick " when describing a potential revenue outlook??
if Q3 revenue is at or above $30M, would this then be on target for a " hockey stick " pattern of revenue to occur?
there I go again " engaging in wishful and magical thinking "
Posted by christ3opher - 12 years ago | Updated 12 years ago
christ3opher, I'm going to take a wild guess and suggest that CRG might have been talking about a hockey stick in terms of new product revenues and not overall revenue (and I just thought of that while reading your post - CRG might have been referring to a sharp increase in new product revenue only). So long as the mix remains about 50/50 between new and legacy products and the new products revenues are accelerating as legacy products are declining, it would just be very difficult to pull-off that kind of growth. If vtss really was a start-up with no legacy product revenue, then I think that's what to expect: a "hockey stick". I just don't think it might be possible here.
If, by chance we hit $30M, I say P/S goes to 2.25 from around the current levels of 1.7, and we see the share price go to around $4.25.
That is my best guess.
Posted by phobos - 12 years ago
agreed phobos, regarding new product revenue making up the hockey stick
Gardner must be able to somewhat see into his future, reason why he must have had some numbers in mind before blurting out " hockey stick "
Q 1 CC Question: "so just kind of take it up in a hockey stick format, I guess, is the question to a big, huge Q3 and then it just kind of stabilizes at that rate? "
CEO Gardner response: " No, we continue to see growth Q3 to Q 4 and it's a little far out right now. But we would expect certainly that growth to continue, maybe not quite at that torrid pace. "
this tells me that Gardner does see an exceptional Quarter 3 and 4.
For the record, what the hell does Gardner know about exceptional ?
Posted by christ3opher - 12 years ago | Updated 12 years ago
"CEO Gardner response: " No, we continue to see growth Q3 to Q 4 and it's a little far out right now. But we would expect certainly that growth to continue, maybe not quite at that torrid pace. ""
I think, and correct me if I'm wrong, but the "torrid pace" he might have been referring to was the 29% sequential growth Q on Q for new products for last quarter. That would turn out to be around 177% with compounding for the year! I think that vtss was looking for about 15~20% Q on Q growth in new products for a yearly growth rate some place in the 80%+ range. They did start with 100% (an engineering estimate and a reach number that has lead to the shareholders' feeling that he over-promises and under-delivers).
Let's see what happens... it's less than a week now!
Posted by phobos - 12 years ago
I find this chart curious:
http://finance.yahoo.com/q/bc?s=VTSS&t=3m&l=on&z=l&q=l&c=brcm
It details the relative price change of VTSS' shares vs. those of arch rival BRCM (in CRG's mind anyway) over the last 3 months. Right around the beginning of June a peculiar divergence in share price trend begins.
Right around this time (beginning of June) BRCM decided to wind down its base-band business (they decided that they were hemorrhaging money competing with Qualcom) in order to focus on "Looking forward, Broadcom will focus on the infrastructure, broadband and connectivity markets." from the article below:
http://blogs.barrons.com/techtraderdaily/2014/06/02/broadcom-closes-up-9-on-exit-of-baseband-wells-cuts-to-sell-bernstein-ups-target-to-42/?mod=yahoobarrons&ru=yahoo
These sound a lot like VTSS' markets. Is VTSS now competing with the 600-pound gorilla of the industry?
In another article:
http://finance.yahoo.com/news/broadcom-announces-multiport-10-gigabit-120000479.html
BRCM announces "New Multiport 10 Gigabit Ethernet Switch for Embedded Connectivity" with the following feature-set:
-Key Features of the BCM5340x and BCM5341x Switches
-160 Gbps Switching Capacity Bandwidth
-Optional integrated ARM Cortex A9 CPU
-Integrated 10G SerDes with diverse I/O for multiple configurations
-Advanced single-stage ContentAware Engine for ACLs and QoS
-Timestamping support with 1588 TC and SyncE
-Low-power Energy Efficient Ethernet (EEE) support
-Enterprise-class L2/L2+ scalability
The part about "ContentAware Engine" lept off the page and bit me on the ankle, along with "Energy Efficient Ethernet", "1588", and "160Gbps capacity bandwidth" (two VTSS "Jaguar 2's"?).
I'm either reading that as VTSS is licensing IP to BRCM, or BRCM has VTSS directly in its cross-hairs. Judging by the divergence between the share price of both companies, tomorrow and what we learn (idiot analysts willing), may tell us where VTSS stands. Anything less than a spectacular showing will tend to confirm the market's suspicions to this point (true or not).
I hope that management takes Jack Welch's advice to heart. "If you're not number one or number two in the market, then fix it, sell it, or close it down." This is exactly what BRCM did with their base-band products. Because, ultimately, a great product and no sales is a hobby at best, not a business, and at worst riding the gravy train on the shareholders' dime. It might be why BRCM is number one in the market.
Posted by phobos - 12 years ago | Updated 12 years ago
BRCM is a real company- VTSS is just a trust fund for CRG and his other charges. It will be interesting to see if anyone has the guts to hold or buy before earnings. I might hold a small core position, but have been trading the bounces in the stock.
Posted by Techinvestor - 12 years ago
phobos,
( remember reading somewhere) Vitesse IS licensing product to Broadcom.
page 10 identifies all competitors and the reasons why Vitesse prevails. ( successful is another whole story )
http://files.shareholder.com/downloads/ABEA-4EMVKT/3375219336x0x686149/610bdffd-62f9-4d0e-863d-f9bb9ada439e/VTSS-Overview_08122013_FINAL.pdf
Posted by christ3opher - 12 years ago | Updated 12 years ago
lets hope that in the 3 years Broadcom ran like a be-headed chicken Vitesse managed to build, add to the ''sticky-ness" of her products, because indeed the hated one is coming after us.
A year or so ago Broadcom announced her version of VeriT which Crg welcomed knowing he still had a better mouse trap; lets really hope(tomorrow be a great time to find out) that he's build a large lead on competitors.
Our bundling of INTELLISEC might be our lone edge on Broadcom which is still very compelling, but how long before she concocts a similar solution??
Very true Christ3, but for years Broadcom classified us as a laughing stock, one to be taken lightly, inconsequential, meaningless(similar to black-men reality in the scheme of things) now they are setting their sites on our NICHE.
Vitesse must respond by perhaps adding more bandwidth to future products.
Anyone recall the TIGER'S bandwidth? Tiger update be greatly appreciated CRG!!!!
Posted by GARIF - 12 years ago
Christ3, please dear friend search where you read this and confirm it for us!!!! this would be a serious coup indeed!!!!
We know AMCC uses some of our stuff! I recall Mindspeed turned to Symmetricom(who Vitesse works with) for Timing.
Can it be that Broadcom uses Symmetricom also???
Vitesse has said they license to areas where they don't do business themselves, but Man! it be sweet if we're bailing out the enemy in some capacity.
Posted by GARIF - 12 years ago
to begin with:
according to a past post by daWiley which was eleven months ago:-->" vtss is inside the biggest players now--Cisco and Broadcom-CSCO thru meraki purchase--BRCM thru netLogic purchase (they took writedown because of delays)"
" Meraki and NetLogic both are customers of Vitesse, in new cloud boxes that make local cloud servers for small and medium sized corporations as local internet clouds of private corporate networks."
http://blogs.barrons.com/techtraderdaily/2011/09/12/netlogic-soars-50-on-broadcom-buy-whither-cavium/?mod=yahoobarrons
I had the below listing under a different heading:>
" Apple and IBM Team up"
Apple and IBM, both customers of Vitesse
IBM also a customer of Broadcom:
http://www.lightreading.com/comms-chips/broadcoms-ethernet-club-revealed-(sort-of)/d/d-id/686733
the above story (listed by phobos) names the Broadcom customers that are also customers of Vitesse.
Adtran, Avaya, Dell, Hitachi, Hewlett- Packard, IBM, NEC.
I believe that you will find a lot of Vitesse IP product inside a lot of Broadcom products either directly or indirectly.
Posted by christ3opher - 12 years ago | Updated 12 years ago
Cool yea, I remember that post by Wiley, can it be that the hated ones have extended the license through the Netlogic connection??
http://www.broadcom.com/press/release.php?id=s604481
"The acquisition meaningfully extends Broadcom's infrastructure portfolio with a number of critical new product lines and technologies, including knowledge-based processors, multi-core embedded processors, and digital front-end processors, each of which offers industry-leading performance and capabilities. The combination enables Broadcom to deliver best-in-class, seamlessly-integrated network infrastructure platforms to its customers, reducing both their time-to-market and their development costs."
I trust Vitesse made phone calls regarding unauthorized use of her technology... Can it be, could it be that we are in many of Broadcom newly released products??
Posted by GARIF - 12 years ago
here is another connection, this one looks to be one that matters.
12/9/2010 Symmetricom product, selected by Broadcom (with Vitesse parts inside)
Symmetricom SCi2000 Embedded Software Clock has been selected by Broadcom for integration into its 1588-enabled processor, switch and PHY system platforms.
http://www.businesswire.com/news/home/20101209005496/en/Symmetricom-SCi-2000-Embedded-Software-Clock-Selected#.U-AwHGfwu1s
Q 3 earnings call 2012 Gardner responding to a question (pulling it all together)
" And we work in conjunction with the guys who really developed the clocking plane if you will, the companies like Symmetricom and Microsemi, etc. We kind of worked together with them. But our technology makes their technology much better. "
Posted by christ3opher - 12 years ago | Updated 12 years ago
The Vitesse fig tree seems to be feeding even her enemies! will tomorrow lead to concrete revelations from our captain of industry? will tomorrow bring the long awaited positive surprise? or will the "wait till next Q" be the line of the afternoon??
Will be interesting...
Posted by GARIF - 12 years ago
"Captain of Industry"- Wouldn't that be great! It is definitely a soap opera. The probabilities say it will be another "Ho-hum" quarter but we're starting to gain traction and China will improve in the immortal words of CRG.
Posted by Techinvestor - 12 years ago
From Lucent,
"However, shares plunged 12.2% following the announcement on Jul 31 due to the prevailing softness in the North American market, where revenues declined 2.6% year over year. Revenues from Europe and the Rest of World were down 7.2% and 15.2%, respectively. However, the company reported strong growth in Asia-Pacific with revenues increasing 25.2% year over year, driven by the rapid network roll-outs in China.
Crg used to preach "as goes China so goes Vitesse" but the same man has told us,
"Chris: Not really. So we’re not in the base station deployments that are getting a lot of
news, and I don’t know if that’s really helping anybody specifically today or not.
We connect into the infrastructure that would support those base stations, so in
general we’ve seen China over the last quarter has been okay – not great, not
horrible."
Will be interesting!
Posted by GARIF - 12 years ago
Famous Last Words:
On the May report - "For the third quarter of fiscal year 2014, ending June 30, 2014, Vitesse expects revenue to be in the range of $26.5 million to $28.5 million and product margins to be between 54% and 56%. GAAP operating expenses are expected to be between $17.0 million and $18.0 million. "
I see a perfect storm - miss on Earnings, Revenue, Margins, Expenses.
Here comes $2.50 again - perhaps even afterhours trading.
Betting baseball is easier and much more fun.
Satbob
Posted by Satbob - 12 years ago
I'm betting a Sale is the next thing to come out. They have already set the $4.50 target level - it just makes sense.
Posted by Satbob - 12 years ago
Earnings out: $ 27.2 mil Revs.
Posted by Techinvestor - 12 years ago
Miss on Revenues
Miss on Earnings
Miss on Margins
Posted by Satbob - 12 years ago
I guess the market doesn't care about Intellisec and BRCM deals, etc. They know it's just the same old story- yada, yada, yada...
Posted by Techinvestor - 12 years ago
Boy, did they dump it on folks with that $3.35 "SALE". Down just 10% so far - I wonder how Mr. Billy is taking this? Buying more? Doubt it - when he goes - it's overrrrrrrrrrrrr.
Posted by Satbob - 12 years ago
Gotta love this...
"the growth of our new product portfolio again outstripped the decline of our legacy business, resulting in total revenue growth of 6% sequentially and 3% from the year ago quarter,” said Chris Gardner...
And then we read: "Product revenue was $26.0 million, compared to $24.9 million in the second quarter of fiscal year 2014 and $26.3 million in the third quarter of fiscal year 2013."
The only reason there was *any* YoY increase was due to non-product (i.e., IP) revenues. IMO, it's disingenuous to claim that new product revenues outstripped legacy revenue. [Not to mention that even if it truly was a 3% increase, that would be pitiful.]
Posted by HappyGoLucky - 12 years ago
I think I heard 2015 forecast as yet another down year in revenue. And one that "we are very pleased with." I would say unbelievable but it is Gardner. So it is very believable.
the question asked "how confident are you in the expected 50% year over year growth in new product revenue?" Answer "pretty confident." The follow up that wasn't asked, "As confident as you were in operating breakeven for the 3Q you just missed?"
7-8 years of nowhere. There is no reason for this company to exist.
Posted by dlog - 12 years ago
You're right- if BM goes that's game, set, match. dlog is being kind to call this a company.
Posted by Techinvestor - 12 years ago
What's really sad is no one cares about this stock- noticed 1 after hours trade at 1:30 for $ 3.04 and see nothing since.
It's earnings day!!! The lack of interest in this stock is telling. Not 1 post on Yahoo Finance VTSS Thread today about VTSS either.
Posted by Techinvestor - 12 years ago
Here is a thought - CRG is clearly in the wrong business. He should be in Politics. We all are down about the miserable results and that fact that estimates are now being taken down again all over the place. However, we all realize that it is easy to fool us, the little guys, but CRG continues to fool the BIG GUYS. A lot of Big Fish have been betting on this thing for a long time now, ever increasing their stakes. Offering shares at a $1.75 and then $3.35 and they keep buying. These are people who have even been able to put their own people on the Board - how does he continue to fool everyone? You would think with people on the Board they would know better where we are and what is going to happen. He must have quite a line - unfortunately, the Market doesn't seem to get fooled. We are now below 2013 year-end numbers and forecast to go nowhere. Just a thought. I am not the only getting fooled here.
I said some time back that if you build a better mousetrap they will come, but since they have not come, it only stands to reason that in fact this is not a better mousetrap. Just a Flim-flam Man. I've seen this movie before.
Satbob
Posted by Satbob - 12 years ago
He definitely has the magic touch- it's not as if he is the founder of company controlling a major chunk of the shares. What's amazing to me is the lack of proactive major owners- Kopp Investment Advisors has been a major holder forever and doesn't seem to care that they lose money every year.
Don't they know that if they get rid of CRG and replace him with anyone, the stock will have a big pop. I've said this before, but they need new blood in the Sales management- they do have a better mousetrap but need new bait.
Posted by Techinvestor - 12 years ago
I'm going to take a look at some of the things that were "tweeted" simultaneously with the earnings release.
"New product revenues up 21% sequentially, now >50% of total revenues"
New product revenues were up 21% sequentially, which equates to around a 114%/year growth rate. Longer term we've actually seen something like 80%+ growth rates, or about 17% sequentially in new products. New products now constitute 51% of total revenues and as new product revenue growth is much higher than old product revenue decline, we should begin to see the growth rate in overall revenues accelerate. What constitutes a new product and a legacy product I do not believe is audited.
"Total revenues were up 6% sequentially & up 3% on an annual basis". OK.
"We see Ethernet virtually everywhere". I do too, but I am really interested in how much of "everywhere" will belong to VTSS.
"So far this fiscal, design wins are up over 45% compared with 2013". The "design win" is another unaudited metric, although CRG claims design wins are within 10% predictors of eventual revenues. OK. I just hope that the "design win" isn't CRG's version of Lou's "channel stuffing". I would hope that the people that BM placed on the board would be sophisticated enough to catch this.
"Q3 FY14 total revenue was $27.2M, within guidance & up 6% compared to prior Q" Yes, everything is up and within guidance, but why did CRG claim operating break-even this quarter, which raised analyst expectations? Was CRG counting on settling the debt sooner and eliminating the interest expense and making the loss narrower (even though the interest is not an operating expense)? It would have been a coup that would have bought some forgiveness - he did claim that the debt would be paid-off in the coming quarter and interest payments would be lowered considerably. OK.
"Q3 FY14 IP revenue was $1.1M"
$1.1M is about 7.9% of $13.9M (new product revenue), which is right around where VTSS claimed that IP revenue would reside (around 8% after it was initially estimated at 10% earlier on). OK.
"Q3 FY14 product revenues were $26.0M, up from $24.9 in prior Q"
True. This is about 4.4% per quarter or about 19% per year. OK.
So far, it sounds pretty good, not break-even, but pretty good. Until we found out that in the first quarter of '15, that legacy would take a 30 or 40% hit. I' surprised that every single analyst didn't jump on this!
"In Q3, our mature product portfolio was $11.8 million, remaining flat from Q2. As we see it now, mature should drop a little more in Q4 and then decline more materially starting in Q1. In particular, both our PMD products that sell in the optical module markets and our commodity low port count Enterprise switches will decline substantially starting in Q1. We intentionally exited these areas and have not invested in these 2 product portfolios in nearly a decade. We now believe the overall impact will happen faster than we estimated at the beginning of the year with the decline of about 30% to 40% of the total mature revenue in the first half of fiscal year 2015. We then expect the decline to slow materially to about 10% to 20% per year, reflecting the portion of our mature products that are designed into systems that we'll ship for many more years."
So I was estimating $30.5M total revenue for Q1'15. I was estimating $11.5M of legacy revenue. But we could see a number as low as $6.9M for legacy, making total revenue something like $25.9M.
The "Homina, homina, homina" moment came courtesy of Gary Mobley of Bechmark:
GM: "Also, in your prepared remarks, you talked about the rate of decline for your mature product. You mentioned some percentage rate decline for the first half of 2015, and I think it was 30% or 40%. Is that a decline on the year-over-year basis that you were quoting?"
CRG: "That's a decline on our quarterly run rate. So we expect the quarterly run rate -- exiting 2014, we expect about a 30% to 40% decline in the first half on a quarterly basis."
So this leaves it sounding as if there might be two quarters of 30 to 40% declines sequentially (Holy Jeezus!). But, Chris Schwab of Hallum recovers the fumble:
CS: "Just so we're all on the same page in our models tomorrow morning, I just want to make sure I understood that mature product line correctly. So if we do $11 million and change in September, is it down 30% to 40% in December and down another 30% to 40% in March? Or is it take a ladder step-down, 30% to 40%, right away in December?"
CRG: "Yes. We don't expect it to take it down 2 quarters sequentially at 30% to 40%. We expect -- you said $11 million and change, think about 30% to 40% off that, probably, mostly in the first quarter."
CS: "Mostly in the first quarter and then a little bit less in the second quarter?"
CRG: "Right around and then move down from there."
So, this is why the share price is plunging. People will go away now, wait for the horrible showing in Q1'15, and probably buy back in then, unless there are more surprises. The surprises to the down-side is what's killing the share price. If CRG takes away anything from this it should be two things:
1. Under promise and over deliver. Getting an exact value is good in engineering, but not investing.
2. "Murphy's Law" is always in effect. Derate all estimates to the down-side keeping Murphy's Law in mind.
Incredible.
Posted by phobos - 12 years ago | Updated 12 years ago
thanks phobos, excellent explanation of the Q 3 call.
it is obvious that even though Vitesse has been expanding on their product line ( this is great and most products are unmatched)
BUT it is going to take a lot more TIME to get the Vitesse products out into the field. More TIME than anyone could determine. Gardner made a reference to the amount of TIME during the call.
Here is looking forward to 2016 !!
Posted by christ3opher - 12 years ago | Updated 12 years ago
Hell, I think you are all missing the point - how many of these 'new products" are so old now that they are about to become legacy products?
I can't understand how the Big Boys are getting fooled by this FOOL. Hell, they have people on the Board - they sure as hell should KNOW what is going on, but they seem to be getting caught just like everyone else. CRG sure can spin some crap and continues getting away with it.
Discussed in Texas
Posted by Satbob - 12 years ago
Do you mean " disgusted ", I agree but What do we do ?????
its only been how many years ???? 8
How about sending a letter to Martins man on the BOD, Traub
The more sending the better for A response.
Posted by christ3opher - 12 years ago | Updated 12 years ago
Looking at my model that I have... vtss will move from $32M in revenues in Q1'15 to Q3'15. $32M is significant because it is right around what vtss needs for operating break-even (with the increase in operating expenses looking forward). $40M moves from Q4'15 to Q4'16. This all assumes we have no additional bumps in the road. Right.
I'm looking for a Q4'14 near the top of the range ($28.7M).
New product revenues are still growing at an impressive clip, but this is not an audited figure. CRG did not sound hopeful of a great Q4 for new products.
CapEx is usually down in a bad economy. This is a bad economy. VTSS sells to people who make infrastructure. Should we be surprised that new products... even good new products, have had a rough go of it?
Is VTSS' problem from the economy or growing competition? I heard nothing about winning "bake-offs" this time.
I don't even want to see what the share price is going to do today. At least there was a slight bounce after hours.
Does VTSS still have a compelling story? Yes. But as Keynes once said about the market, “The market can stay irrational longer than you can stay solvent.”
Posted by phobos - 12 years ago | Updated 12 years ago
I'm speaking with BOD member Traub today at 2:00 ET
Besides my questions I have room for a few more so if interested, list them.
Posted by christ3opher - 12 years ago
First and foremost christ3opher, thank you for being so proactive.
I would like to know, given that vtss will take a big cash hit to settle the debt, and that BE is happening much later than some of us had anticipated, what are Mr. Traub's thoughts about either VTSS running out of cash before BE, or not having the resources that it may need to make beneficial strategic moves that it otherwise might if VTSS' business was something other than periodic stock offerings (sorry, I can't help the sarcasm at this point)?
Also, what are Mr. Traub's thoughts about when VTSS should reach BE?
Is the slowing growth in VTSS' new products because of the economy, competition, or both. If so, what is that mix now (how much competition and how much economy?), and how will it change in the immediate future?
Thank you in advance christ3opher.
Posted by phobos - 12 years ago | Updated 12 years ago
Question: What happened to the "hockey stick"? Personally, I think they used that to fool folks into buying that $3.35 offering before they tanked the stock for another year, but that's just MHO.
Posted by Satbob - 12 years ago
Chris do ask,
Is INTELLISEC dominating the market, is it our game changer?
Has he heard rumors about the TIGER???
THANKS
Posted by GARIF - 12 years ago
If the immanent collapse in legacy product revenue caused the share price to collapse to the $3 range, it was the following statement that kept the share price from collapsing to $2.50, or lower:
"Thus far, in 2014, design wins are up over 45% compared with 2013. Many of these design wins are coming from new customers. With 90 new customers added so far this year, we're on track to beat the nearly 100 new customers added in 2013. Our focus in IoT is supporting this growth as it now accounts for about 30% of our new wins." -- CRG
I wonder if we will get a similar announcement about storage or automotive some day? At least we got a couple of quarters' "heads-up" from CRG. He's learning.
Posted by phobos - 12 years ago
Christopher, anything you can share from your conversation with board member Traub?
Posted by sharpinvestments - 12 years ago
Or is it that most would be selling at a complete loss? souls who bought at $3... would be loosing money, imagine saps like many of US who've averaged down...
We must admit that perhaps some of that Ivy league rubbed off on Crg as he was able to get the moneys necessary to keep us afloat until the "design wins" start kicking in, and didn't give away the farm!! Hell of a COUP!!
Are the Design wins 100% real? like a Merry-go-round no body knows!!! so we wait or take our losses and move on.
Seems like there is a Virus in Vitesse land, as Traub probably Welched on Chris3; the THOU SHALL NOT KEEP MY WORD VIRUS was born in DC I believe... for those who do not understand me
''READ MY LIPS"
Posted by GARIF - 12 years ago
I apologize for the delay,
Mr. Traub was happy to speak with me.
First question I asked was his thoughts on our CEO. His response was not so much about Gardner but was about what this company has accomplished regarding "new" product revenue.
I asked about his thoughts on the company having enough $ before BE. He said very assuredly, no more dilution.
as far as any slowing in "new" product revenue growth from competition or the economy. he said "neither,we are not going to see a continuous straight line up." being realistic, this is ALL based on TIME with many ups and downs, it's all part of the evolution process. As far as when we reach BE, he would not say but he is not worried either. He did say that we have competitors, but feels Vitesse presently has the superior products.
He said that the future of Vitesse looks very good and right now the stock is very cheap, reason being for what we have all been living through. A lot of what we are seeing with delays and missed revenue is the nature of the business and has to be expected.
All goes back to what has been said earlier. We must look at Vitesse as a start up, once the debt is paid off, the new product revenue is all that matters.
I was going to ask about the "hockey stick" even before Satbob asked but decided not to. this question should be asked directly to Gardner. I have made the request, we'll see what happens.
Garif, you asked your questions about two hours after I spoke with him, sorry.
Look, this guy is more than happy with where Vitesse is right now. The past does not matter to him, new product revenue does. He "sympathizes" with the "bagholders"
BUT, when it comes down to it, the numbers are what matters, that's it.
This is all an entirely new branch of communications, with many newly discovered (still discovering) branches. Storage, video, security, etc. all involving Vitesse. There is NO problem with the marketing team, it is going to take time for the many different companies involved to decide when they want to make the transition. It can't be forced, but in time it will evolve.
Check out the Vitesse Twitter page(click on "view conversation") there is one very pissed off investor making numerous complaints about Gardner.
Actually, good to see because I like most here is a long term bagholder and I have been footing the bill for this company, a looooong ass time. it will not be soon enough before I will be getting some payback.
also, since Traub is on the compensation committee, I mentioned that I thought Gardner was making too much money. Traub then told me he has not got a bonus and will not until share price moves up.
Posted by christ3opher - 12 years ago | Updated 12 years ago
Garif,
I do not believe at all that Traub would do any such thing regarding your comment above. He is looking out for Martin, and that Martin makes money, not what Vitesse tells him. I do not believe Vitesse is doing what you mentioned above either.
Also,
from what I was told, Gardner had nothing to do with the last two offerings.(providing Vitesse with $) it was Martin.
Posted by christ3opher - 12 years ago | Updated 12 years ago
Have to agree with Traub that new product growth is what matters. Phobos' estimate of $32M next June represents about 15% quarterly growth of new products. If growth is closer to 20% then we'll see over 37M in June. Gardner was guiding for mid-teen growth in the coming quarter but maybe he's finally doing a little low balling since growth has averaged 25% in the last two quarters.
Posted by thereinman - 12 years ago
Such can be the nature of reputation Chris3, when I awoke this afternoon and saw that you had not responded I thought like every board member(I just happened to air it out), HE WELCHED, didn't deliver!! why?? because this has become a Vitesse norm.
We react like Pavlov dogs when we hear "Vitesse" these days! few years ago while walking around UCLA I happened upon a lady(perhaps a prof) who when she saw me tried to shift her purse to the opposite arm but in the process dropped a bundle of papers she was carrying; I jokingly offered "may I help" but kept my distance as I continued my walk.
Such can be the nature of conditioning...
In the future a little heads up be nice, like Guys got the call will report later!!
Thanks again for sharing this vital, in many ways more important than Crg's report. Great to hear the big boys are ok with the progress of the company, because in the final analysis their "ok" is the most important, I thank their research team.
My chime often is about whats wrong in the world and how I been victimized...
2 months ago I experienced the most unique of human situations! I arrived early in NH and found no housing in town; so i asked a local lady if she knew of a place near by where I could find sleeping quarters for a couple of nights until my local reservations kicked in.
The lady gave directions to Vermont hotels/motels about 5 miles away, I thanked her and started walking;10 minutes into my walk the lady appeared and offered me a spare room in her house! I thanked her for the offer but declined not wanting to impose... BUT I INSIST!! the room is not being occupied... I got in the car and in route discovered she was a French prof at the University, she gave me a house key and said she comes in and goes all day.
Next day as I am walking around town she pulls up and asks if I wished for her to take some groceries I had purchased home? after I responded in the affirmative she said, "OH I DON'T KNOW YOUR NAME!!
An Anglo woman in her late 30's shares her house with a total stranger,not to mention one of Black persuasion, by her lonesome, JUST THE TWO OF US BOARD MEMBERS!!
Having experienced the multiple energies of my fellow men, the New Hampshire occurrence is one I will share for the rest of my life!! In fact it's the greatest thing that has happened to me.
PEACE
Posted by GARIF - 12 years ago
Thank you christ3opher.
The main question I wanted answered, but did not ask was "Are the pros OK with all this?" The answer is "Yes." This means that not only are things going well from the standpoint of those with more access than we, but vtss is also in no immediate danger of BM taking his money and leaving.
THIS is what we needed.
Thanks again for your pro-activity on this christ3opher.
Posted by phobos - 12 years ago
" In the future a little heads up be nice, like Guys got the call will report later. "
here we go again !!!!
Are you serious!!!!!, that's one hell of a remark!, what difference does it make that I reported back one day after the call occurred???
I guess you are the only one here that anything matters about, whereas a few years back after attending a shareholders meet, you then strolled off to Frisco for a few days, before following up here. Maybe I was doing something that was important to me and my family, delaying my response by ONE F***ING DAY !!
Come on dude, go back and read what this forum is supposed to be based on " Any topic that is relevant to VTSS !! " not about your experiences, prancing around the neighborhoods of America !!
Garif, It does not make me feel good doing this but Again, I am being dragged into a situation that I want nothing to do with. When you make a remark like that there is no way in hell I am going to let it slide!
Please, stick to what this forum is supposed to be about, that being Vitesse.
Posted by christ3opher - 12 years ago
daWailey's report was very on the money, there was not much more I could have added.
My bad! In no way was I trying to ruin the moment, thanks again for sharing Mr Traub's Vital insider point of view; we can all rest a little easier in my opinion.
family time is precious time, I hoarded every opportunity when my kids were younger, I wish you the same.
My apologies!
PEACE
Posted by GARIF - 12 years ago
For those of you that worry about BM - don't. I pulled all of his filings. The bulk of his holdings - 10m shares - were purchased prior to this year with an average price of JUST $2.11. Right now he is up about $6m - when we were up in the $4.69 level he was up about $8m but has given some back since all of his purchases this year are in the red. So, bottomline, don't worry about him - with all of his purchases factored in his BE is just $2.46. He's just fine. I wish my BE was $2.46.....
Posted by Satbob - 12 years ago
Hey, look - we're at $2.92 - close of business price 2013! What a fun ride.
Posted by Satbob - 12 years ago
What's with the spike down to $ 2.76 at opening today? I don't know size of trade, but someone wanted out badly.
Posted by Techinvestor - 12 years ago
That's what you get when you say "market". Not brilliant.
Posted by Satbob - 12 years ago
http://investor.vitesse.com/releasedetail.cfm?ReleaseID=698094
http://investor.vitesse.com/releasedetail.cfm?ReleaseID=651508
http://investor.vitesse.com/releasedetail.cfm?ReleaseID=724362
I believe Crg talked of a Design win project started in early 2011 not adding to the bottom line until this Q. if I understand correctly, the above projects big payload won't start until late 2015.
If this is correct we're looking at dead money here until Q3 or so next year, right??
Posted by GARIF - 12 years ago
CORRECTION
The other day I wrote, "For those of you that worry about BM - don't. I pulled all of his filings. The bulk of his holdings - 10m shares - were purchased prior to this year with an average price of JUST $2.11. Right now he is up about $6m - when we were up in the $4.69 level he was up about $8m but has given some back since all of his purchases this year are in the red. So, bottomline, don't worry about him - with all of his purchases factored in his BE is just $2.46. He's just fine. I wish my BE was $2.46....."
There were some glaring errors in that report - so far BM has put a little over $35m into VTSS. At the end of 2013 (@ $2.92) he was up a little over $8m. When the stock went to $4.69, he was up nearly $32m on his $35m. I bet he wishes he had some of that back, but don't worry about him. He buys some real dogs betting on the "Come" - see GEGSO.........
Posted by Satbob - 12 years ago
"On the come" is where the biggest money can be made but also lost, so Crg has him by the Nuts also! welcome to the club... So we wait and wait, and perhaps sometimes next year Design win production($$) will ease the pain of Legacy decline.
Speaking of Legacy issues, we seem to not be alone...
http://blogs.barrons.com/techtraderdaily/2014/08/12/applied-micro-fbr-cuts-to-hold-deterioration-of-legacy-biz-overshadows-server-chip-promise/?mod=yahoobarrons&ru=yahoo
Posted by GARIF - 12 years ago
Good find GARIF. AMCC is citing 2016 or 2017 as the ramp in their nascent server chip line. That would seem to be much more of a gap than what vtss has. ...it can always be worse.
@satbob: thanks for the research. It's good to know that BM is not going anywhere just yet.
Posted by phobos - 12 years ago | Updated 12 years ago
"it can always be worst"
Glass half full mentality, love your mental energy Phobos!
Indeed Crg has made the moves of his life, in securing funding until design win returns swing into full mode.
In this last round he got some Big boys(perhaps with outside help, thanks christ3) to back his vision.
If people with research teams are ok with the direction/vision of Crg, then I too will sit back and add when my funds allow.
phobos, last night I saw this kid(30) walking with a walker, as a non minder of my business I inquired thinking it was a stroke; the younger man responded, "motorcycle accident, BUT it could have been worst."
While he waited to be picked up, we talked about the hands that Life deals us... how things could be worst!!!!!!!
Peace
Posted by GARIF - 12 years ago
Can anyone make any sense out of "WHY" VTSS doesn't go and payoff the October debt NOW? What sense does it make to have money in the bank drawing nothing and continuing to pay 8% to the debt? Someone offer something sensible, Chris??
Posted by Satbob - 12 years ago
I think that they would have to re-negotiate the terms if they did. Fat Andy would probably want more for an earlier payoff.
Posted by phobos - 12 years ago
The October debt doesn't have anything to do with Whitebox - that is due in 2016.
Posted by Satbob - 12 years ago
My mistake, and my apologies.
Good question. Either there is some downside for early payoff, or vtss has a great place to park all that cash.
Posted by phobos - 12 years ago | Updated 12 years ago
Satbob,
the debentures due in October of this year 2014, are widely held by Martin. Vitesse is allowed to pay the debt early in partial or in whole. I am also surprised(but at this point not really) to see an early pay-off NOT happening.
Why is the debt not being paid off NOW ?
Unless, this has something to do with Martin, who knows?
I have two questions in to Gardner,
1. explain the use of the phrase " hockey stick "
2. please tell us why Vitesse continues to pay an added 8% of the debentures a month when for the past two months(4 months by October) there have been enough funds to pay it off in full.
see what happens
Posted by christ3opher - 12 years ago | Updated 12 years ago
There is no hockey stick unless and until the revenue is derived from mostly the sale of new products. Until then, growth in new product sales will be (partially/totally) offset by declines in legacy products in my humble opinion. We are experiencing a hockey stick in new product demand, but you can't see that in the top line... yet.
Christ3opher, I think you just answered the question. Martin is still getting the interest and VTSS still remains very liquid.
Posted by phobos - 12 years ago
phobos, I understand all about the hockey stick being about new product sales.
BUT,
CEO Gardner stated that there was to be a hockey stick in revenue growth during the third and fourth quarters of 2014. we all know it aint happening.
I and a few others here would like to be explained by Gardner his reasoning in even bringing up the phrase HOCKEY STICK.
at this stage of the game with the ways things have played out HOCKEY STICK should never have been brought up at all!
again, thanks for your contributions to this forum, much appreciated
Posted by christ3opher - 12 years ago | Updated 12 years ago
It's understandable for CRG to want to hold onto the funds for unanticipated expenses, opportunities, etc. And as you said phobos, maybe some pressure to continue to pay the high interest by the lenders.
I just hope he's invested in something liquid, but getting more than zero interest.
Is CRG Canadian? That would explain the hockey stick analogy.
Posted by Techinvestor - 12 years ago
Hockey Stick??
He's a Kings fan who still can't believe like I that they have done the impossible, TWICE!!! no longer are they the laughing "STOCK'of Hockey. Perhaps "Hockey Stick" is a chant for good luck... It worked for our Kings!!!!!!
Go Kings! ops I mean Vitesse!!!!
Posted by GARIF - 12 years ago
I understood somewhere(just can't find that quote) that they would have to pay the interest regardless even had they retired that portion of the debt a year ago. there was a window in which the debt could have been retired early but it closed.
personally I hope they pay say half and negotiate the balance on favorable terms. The company seems to be using Cash wisely, this should continue...
Posted by GARIF - 12 years ago
It has been three weeks since the Q3 CC (8/5). as of today (8/25), yahoo has yet to publish the transcript from the call. Anyone know if this is out of the ordinary or not? seems like in the past the transcript was put up much sooner than three weeks.
Posted by christ3opher - 12 years ago | Updated 12 years ago
I used "Seeking Alpha", even though it's a nuissance because you have to log-in. Yahoo isn't what it used to be. Maybe it never was.
Posted by phobos - 12 years ago
I thought I had found a source for Earnings Call Replay (RTTnews.com) , but access code they had previously supplied was no longer valid.
Posted by Techinvestor - 12 years ago
Q3 CC transcript is now up 8/27/14
Posted by christ3opher - 12 years ago
A new 13D/A was filed on 8/24/14 updating Mr. Martins stake in Vitesse.
14,321,127 shares held 21.2% of 67,697,535 shares outstanding.
$35,766,380 is the approximate amount paid for the shares.
This breaks down to $2.49745 a share.
Satbob's above post states $2.46 was paid per share.(very close)
The Debentures owned by Martins company, Raging Master directly owns an aggregate of $8,639,676 principle amount of Debentures. The purchase price paid for the Debentures is $7,411,684, including commissions.
Posted by christ3opher - 12 years ago | Updated 12 years ago
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