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Steven's email is another idiocy...
in a long line of idiocies.
A. He wishes there was a magic bullet that would have created the trusted computing industry earlier? Huh?
B. The Board "...has let us take the risks that any start-up needs to take to realise it's vision." In other words, the board has snored through management's blithe torching of eighty million bucks over fifteen quarters since the year 2000 funding on "selling" (of what, I don't know) and g & a expenses alone. As if renting apartments in New York and Paris for the bigwigs to luxuriate in was somehow necessary in the year 2001.
C. Forgiving Jerry Feeney's loan. "It will be considered as part of future compensation decisions." Yeah, now that's brilliant management for ya. Here, CFO, here's the entire pie. Keep in mind we'll be givin ya just slices in the future, though. What a motivational tool!
D. Forgiving Jerry Feeney's loan, pt. 2. " It would have been very detrimental to be suing and or firing our CFO for non- payment while we were trying to raise capital for the company." Anybody consider the possibility of suing and/or firing the CFO after the fact? Huh? Where does it say that this action had to be taken prior to raising new capital?
E. Forgiving Jerry Feeney's loan, pt. 3. How brilliant is it to suggest that you were even considering suing and/or firing your CFO? Even if he is just a $900,000 lapdog? I mean, it strikes me as incredible that a CEO would make such a comment about his CFO--even if it were true!
F. Forgiving Jerry Feeney's loan, pt. 4. "If we could take a do over margin call at 4-5 would have been a better decision for all." Indecipherable nonsense.
Amateur hour in Lee, MA. As usual.
TRUSTCOUSA: That's why it IS from SKS...
A. The boy doesn't know how to spell, and
B. He doesn't have sense enough, even now, to know when to keep his mouth shut (i.e., with SEC in-house).
Perhaps someone could inquire as to when the stock can be expected to hit 50 again. It would not surprise me if he offered an opinion on that, too.
RACHELELISE: Not exactly...
My point is the runway needs to be longer than the Wavoids think. Trusted Computing may or may not prevail. I'm inclined to think not, but I could be wrong. The only thing I'm fairly certain about is that these are not going to jump off the shelves any time in the near future. I was encouraged by the frank assessment made by non-Spragues at the SHM that seemed to acknowledge this reality. That Steven almost immediately went into denial mode following the meeting was not surprising, but I think it points out that the man does not live in the "real" world, but in some fantasyland that regular CEOs take pain to avoid.
Break-even in 2004 is as crazy an expectation as $21 million was in 2001 and almost as deranged as the Donald Duck lunacy.
Precisely why Trusted Computing won't get off the ground...
not in 2004, anyway.
"...And anytime you transact with a different PC or system, it will cost a fee to verify yourself and the third party server."
Trusted computing is all about generating revenue for the various technology companies behind it. The buyers of this pig-in-a-poke are not that stupid, however. They are going to nail down costs before they commit. They are going to wait for others to prove the value proposition. Breakeven in 2004 is as ludicrous an expectation as $21 million in revenues was in 2001. It ain't gonna happen.
Whitewash/zen: Is it your position...
that management knew all along that it was "never in control of the timeline"?
If they were in tune to this reality, don't you think it would have behooved them to exercise some degree of spending restraint? Wouldn't you expect a competent management team to avoid blowing through EIGHTY MILLION DOLLARS in selling and g & a expenses over the fifteen quarters since they hit the funding jackpot?
Armed with this knowledge, that they had no control over the timeline of the necessary infrastructure to sell a product into, wouldn't you expect management to decline to squander $7 million to acquire an internet shopping portal? (Ishophere.com, reportedly to acquire their "human assets" in the midst of a tech meltdown that saw thousands of the very same human assets in unemployment lines.)
If management had even the remotest clue that they had no control over the deployment timeline, wouldn't it have been prudent to refrain from defending a $21 million revenue projection in the seventh month of a year in which they fell more than 95% short?
You can't have it both ways, boys. Either they knew they were in a state of limbo or they didn't. If they did know, then they laid waste to the company treasury carelessly. If they didn't know where they stood-- that it would have been impossible to succeed under the circumstances--they should have. It's what they get the big bucks for.
No, this has been amateur hour since the day Peter handed the CEO title to his son. Too bad. It didn't have to be this way.
At what time of the day...
on August 5, 2003 did WAVX sell for $5.00? Since that is the price Mr. Feeney got for his stock sale, it should be fairly easy to determine when during the day he sold it. Presumably some trader has access to this information.
Mongo/Snackman/et al: Reuters is not...
under investigation. WAVE is. All the finger-pointing at Sheng and Reuters is, frankly, ridiculous wishful thinking. Is there any wrongdoing in connection with the news releases/clarifications and the options exercise/sale? Maybe. Maybe not. I'm fairly certain the SEC will be able to piece the facts together, but not even that is a sure thing. In the meantime, WAVE has access to the PP money, I'm fairly certain, and the PP participants are not able to unload their shares until the registration is approved. If the stock drifts down in the meantime (or gets slammed by an unfavorable SEC ruling), these folks are--excuse the Army talk--S.O.L. (Although I suppose they could always short the stock to protect themselves.) Anyway, if that is the outcome, you can pretty much count on class action lawsuits to follow. The PP folks will be out for somebody's blood. Of course, ICBW.
zen: Whaddaya mean there was no trading?
Steven and Feeney exercised options to buy their shares and then immediately (or nearly) sold them. It's true Feeney's Form 144 does not show the purchase data, but I think that may have been an oversight. The PR from that date indicates the company received FUNDS from options exercises, so obviously they did not sell shares they already owned.
The question I would have is whether Wave dragged its feet in clarifying the IBM situation and the officers acted opportunistically to sell, knowing that post-clarification, the shares would adjust downward. This would require all sorts of information that nobody here (myself included) would know.
You may recall that I questioned the use of the phrase "partnership with IBM" at the time. Certainly the broadest possible interpretation of "partnership" might permit the usage in the fashion it was used, but it would--IMO--tend to be misleading. If officers jumped through a window that was open for a very short period of time, then they have some explaining to do. I think that is what is going on right now.
Is all this in response to someone's "clues" provided to the SEC? I doubt it. The stock activity all by itself, in addition to new shares being issued, probably was reason enough for an investigation. I thought usually these were done "informally," and this has been stamped a "FORMAL" investigation, so there may be more for the Wavoids to worry about than an informal probe would signify.
24601: Actually, no, the dates do not...
This issue would be WHEN on those dates were the trades made. Of course, if you re-read my earlier comments I said there were reports that the trade happened while the stock was spiking but before the clarification. I have no way of knowing if that is true, nor do I have any idea if there was any impropriety. It's also entirely possible that the trade occurred during that time frame and the individual(s) did nothing improper.
Anyway, at this juncture I think I'll stop speculating and just see how it plays out.
Seems like four-and-out.
smoked: And if officers used the time...
frame between the misleading story and the clarification to exercise options and immediately dump the stock? You think there might be a problem with that? I don't know if it happened, but if it did, the delay in "correcting" the misinformation would appear to be a major legal problem for both the officers who traded during that 24 hours and the company for dragging its feet and (intentionally or not) facilitating the insider profiteering. Not a lawyer, so I readily admit: ICBW.
My guess is the SEC is looking into...
rumors that certain officers exercised options and quickly sold them in the interim between the "misleading" IBM news and the clarification of that news. I have no idea if those rumors are true or false, but if that happened, somebody in Lee is in deep you-know-what.
Another possibility is that the SEC is looking into that chummy little dinner involving Steven and a few of his favorite Wavoids a few days ahead of the INTEL announcement. Lots of possibilities there.
One thing it is NOT is a review of short selling. That is too ludicrous to even suggest. For one thing, the SEC doesn't investigate a company, which is the case here, when it is interested in unaffiliated individuals trading the company.
As always, ICBW.
Actually, 2B, I have...
I bought Sun in 1997, held it to 2000 and liquidated 80% at that juncture, holding the rest because I like the management (except when McNealy is hyperventilating over Bill Gates)
I bought IBM, INTC, F, BA in 1996 and sold them all in 2000 and 2001.
I bought Coke in 1992, Merck in 1993, Sears and LUV in 1995. Held those until I went to cash in late 2000 (a portion in 2001).
Biotechs? I bought Genzyme in 1996 (at $26). Closed that out in 2000, also.
All told I have probably owned 40 to 50 different stocks and held many of them for multiple years.
One stock the Wavoids would do well to study would be Xerox. These people were absolutely brilliant in the lab, but the dunces in management squandered numerous opportunities and someone else ended up making all the profits from their sweat and investment capital. It happens. It especially happens to folks who think management doesn't matter, that technology conquers all.
That's three and out for me. Ciao!
Rachel: I agree with your conclusion...
that the CFO leaving would be a good thing and that a shake-up of the board would also be a good thing. You may even be right that now is not the time for Steven to step down. If this firm IS finally transitioning into one that actually has some sales, it clearly would not be. But someone has to be there to temper the unfettered enthusiasm, to essplain why it isn't a good idea to plant as many flags as possible and then run around defending them, to say no to spending on occasion, and to say hell no when it's something as patently idiotic as the Isophere.com purchase. Will that happen? I doubt it.
2bstealthy: Do you even LOOK AT the financials...
Are you aware that this company spent SEVENTY MILLION DOLLARS during a three year period (2000 - 2002) on "selling" and general and administrative expenses? A period in which total revenues were $1,471,235? I'm not talking R & D here. I'm talking selling (of what I do not know) and g & a. Fiscal mismanagement on an absolutely MONUMENTAL scale. Why?
1. The CEO doesn't live in the real world.
2. The CFO is a $900,000 lapdog who never said no to nothin'.
3. The former Chairman was too busy being a doting daddy to pay attention to the waste.
4. The Board of Directors has been sound asleep since day one.
And you ask for evidence of short-comings in governance? It's staring you right in the face.
zen: It's Santayana...
but I'll let you off with a "typo". Here are a few of his thoughts that you and some of your friends might want to ponder...
"Fanaticism consists in redoubling your efforts when you have forgotten your aim."
Life of Reason, Reason in Common Sense, Scribner's, 1905, page 13
"Scepticism is the chastity of the intellect, and it is shameful to surrender it too soon or to the first comer."
Scepticism and Animal Faith, Scribner's, 1923, p. 69
and, of course...
"Those who cannot remember the past are condemned to repeat it."
Life of Reason, Reason in Common Sense, Scribner's, 1905, page 284
That's three and out for me today! Ciao!
I view Feeney as a $900K lapdog...
a good boy who never says no to anybody, who always whips out the checkbook, no matter if the money's going to a guy with tin foil sticking out of his hat, no matter if it's $7 million for a half-assed internet shopping portal in order to obtain its "human assets" during a period in which the same sorts of individuals are massively underemployed, basically no matter what it is the so-called leadership wants. But, hey, I could be wrong. Please, somebody disabuse me of these notions. Somebody point to a positive contribution by the $900,000 man. There must be something.
ZEN: The CEO has stated all sorts of things...
Like, "we are shipping" on three separate occasions, none of which was followed with any evidence of related sales. (Of course, the last time was recent, so just possibly it will prove to be a shipment of something other than stryofoam nuggets.)
I'm curious to know how much of the SEVENTY MILLION DOLLARS spent in 2000, 2001, and 2002 just on selling and g & a expense do you think was waste? I mean, given the revenues over that period were $1,471,235. You think this was good financial stewardship? Because I don't think the rest of the investing world thinks so. I think objective investors see this as a cash cow--for the corporate officers, that is. You think maybe $20 mill was squandered? Or would you put the number closer to $50 mill? I'm curious.
WaveXpress revenues...
for the quarter ended September 30, 2003 were $31,970. Expenses (excluding depreciation) were $897,743. Depreciation amounted to $64,176 for a total net loss from WaveXpress of $929,949 for Q3. This number is confirmed in the WaveXpress footnote, in which the quarter's loss is rounded to $0.9 million.
Also, from the WaveXpress footnote, "...Through September 30, 2003, Wave had provided approximately $36.5 million in funds to WaveXpress, including approximately $4.9 million in accrued interest."
Hardly chump change. Yes, the squandering has tapered off and the enterprise now bleeds at the rate of $300K per month. How much of this is Sprague salary? It's quite convenient that this enterprise exists, is able to siphon cash out of WAVE proper, and the officer compensation is not required to be fully disclosed. All completely legal, of course. Just not exactly what critics would call straightforward disclosure.
go-kitesurf: You are wrong to assert...
the part bolded below.
"...WaveXpress is a privately held company between Wave and Sarnoff. Revenues will never be publicly disclosed until it is spun off to be a public company. Currently, all WaveXpress customers are generating revenue including: Golfspan, Howard Dean Political Party, Colle and McVoy, Mastery, etc."
If you would proceed to page 11 of the 10Q, you will see under the paragraph heading, Segment Reporting, disclosure of the revenues and expenses of WaveXpress.
Boy, tough crowd...
My sincere apologies to all the Bulgarians I may have offended!
I love it when the Wavoids...
trot out the argument that, ah hem, everybody knew it would be a long slog to deployment. How this knowledge can be reconciled to the squandering of nearly EIGHTY MILLION DOLLARS over the fifteen most recent quarters--if it was known all along that nothing was going to pan out--is something that no one has addressed.
GREG: This is not an unusual view...
and has been expressed in various versions by Zen, Awk, Weby, Snackman, etc., etc., etc. Seems a little, well, cultish to me.
Doma: I agree!
Well, a little bit. "...The O/S will always bring in a small recurring fee if any,possibly less than the $1 ETS software."
The Embassy OS will be, if it isn't already, Java-fied. There will be zip in up-front or recurring fees. The question is whether the drunken sailors operating out of Lee (and I mean that in the figurative sense) can avoid diluting you and the rest of the Wave shareholders to oblivion until they can sell system toll services. Assuming they haven't been coopted by MSFT in the meantime, of course.
As always, ICBW.
Kevin: The missus is widely regarded...
as a saint, but I doubt even she would go along with this.
24601: A "GOOD" CFO...
would never have had to do that last round of financing in the first place. A good CFO would have:
A. Resisted the libertine squandering of EIGHTY MILLION BUCKS on selling and g & a costs during a three and three-quarter year period that yielded a grand total of $1.6 million in sales.
B. Raised enough money in the prior PP to get more than a few months downstream.
C. Not been so quick to enrich himself at the expense of shareholders. $1,780,000 in compensation during the three and three quarter years during which the company booked $1.6 million in revenues is by any sane person's standards ridiculous.
If your point is that he did the best that could be done under difficult circumstances, I'm not even buying that. First, as person responsible for the purse strings, if the company had blown through all the reserves, it was a problem of (at least partially) his own making. Second, he obviously had to discount the stock severely to get even a small deal done. Third, he didn't solve the problem even this time. He will be back raising money again in a matter of months.
And that would be--three and out. Cheers.
24601: The hit to market cap...
obviously. You didn't notice the change in the stock price pre and post-announcement? This is not to mention the fact that the amount raised was not enough to avoid yet another dilution in the not-too-distant future.
Here is my contribution to DD:
These are FACTS:
In the fifteen (15) quarters since January 1, 2000, the aggregate figures:
Total Selling and G&A Expenditures - $79,461,000
Total Revenues - $1,602,000
Total Compensation paid to CFO Feeney - $1,780,000*
*note: Assumes a $2 exercise price on options exercised. Form 144 does not disclose the option exercise price.
One way to view this: Gerard Feeney has put every single dollar this company has realized over the past three and three-quarter years INTO HIS OWN POCKET. And then some. All quite legally, of course.
The Compensation Committee...
in the unlikely event they emerge from their multi-year-stupor, should pose just these questions to Mr. Feeney:
1. Did you object to any part of the seventy million dollars that was spent on "selling" and g & a expenses for 2000 through 2002?
2. Did you oppose the Ishophere acquisition?
The answers to these questions need to be an unequivocal YES, accompanied by examples/explanations. Not a litany of excuses. And certainly not a regurgitation of the CEO's apparent modus operandi (planting as many flags as possible and defending all of them). Cause--excuse me for stating the obvious--but that's a stupid way to run a business. Any business, but especially one with finite funding.
That's three and out for me. Cheers!
Zen: Absolutely...
Nobody out there "gets it". Steven's apparent ineptitude is, as some of us know, merely a clever ruse to enable the brilliant stealth strategy to position the company for the inevitable: World Dominion. Also, Mr. Feeney has put together two horrendous financings back-to-back for the same reason, to make it appear that top management is completely incompetent. Part of this ploy involved the expenditure of some seventy million dollars on "selling" expenses and G & A from 2000 through 2002 even though there wasn't actually anything saleable during that three year time span. All part of the master plan, obviously.
EAMONN: You actually BOUGHT an Envoy?
How much did it cost? And here I thought they never sold a one. My bad.
Doma: That was a prototype...
not a "production" widget. Did the company sell a single Envoy? I seriously doubt it. And God knows what goes on in these demos. (You may substitute a God-substitute there, if you prefer. One must respect the atheists too.) Anyway, I believe David Copperfield was on the payroll at that point in time, wasn't he?
P.S. Go on. E-mail Steven on the NEC SCRs.
P.P.S. There are TPMs and then there are TPMs. The IBM is TPM-lite. The other stuff is imitation TPM-lite.
Doma: While you're e-mailing SKS...
e-mail him on the activation rate of the NEC SCRs. I'm thinking my 5% was about right. (Saying it met their undisclosed expectations is typical Sprague-speak.)
P.S. What was it you said about Finread deployment in 2003? I forget. 20 million? That ring a bell? Anyway, if you get a day or two, can you point to something you got right?
Kitesurf: You claim Envoy actually existed...
But did you or anyone ever actually see said product? The people in WAVE's customer service department seemed not to know what I was talking about when I inquired about it--way back when. I think it was theoretical product. Wave is really excellent at producing that particular type of widget.
24601: Not entirely...
"Do you believe the trusted-client paradigm for trusted computing is happening?"
I think the technology suppliers would like it to be happening, but that the test will come when "enterprises" are faced with an investment decision. I foresee major resistance (Hart poll or no Hart poll).
"...then what do you think the gorillas of the TCG are up to, and why is Intel now alluding to its TPM-equipped offering in terms of a new "generation" of motherboards?"
Again, I think they want this to happen. They would like this to be a new "generation" of motherboards, but market acceptance will determine if it actually will be.
"If you think the trusted-client paradigm is happening, then can you name a purer play on it than Wave?"
If I thought it was "happening" and if I thought management was a. competent and b. only moderately greedy, then I would consider an investment in keeping with my rather conservative risk criteria.
What are the Q4, 2003 revenue projections?
I'm guessing $100K, but that might be too liberal.
Not many rose to defend Feeney...
I notice. 24601? That's usually your role--public defender. I'm guessing the CFO is essentially a Sprague lapdog. A milquetoast sort of person who doesn't like to say no to anything the boss wants. Is there any report of his objecting to the ridiculous expenditures of years past? Did he even raise his eyebrows when the man with tin foil sticking out of his hat walked past his office with a check for a quarter million? Did he so much as shake his head when the brain trust decided to drop $7 million on Ishophere.com? I'm curious. Really. Hey, maybe I'm wrong. Maybe there were countless money-wasting proposals that he shot down! Hey, it's possible!
24601: You missed your cue...
Logan's post was your opportunity to compliment me for all the wonderful things I add to this forum. Perhaps you were dozing.
Zen: Explain the ENVOY launch then...
if that wasn't "made-up" PR, nothing is.
About Feeney...
Considering this guy will have made close to $900,000 in 2003 (counting salary, bonus, extraordinary bonus, and stock option profits, his performance clearly does not warrant such largesse.
One of the primary functions of a CFO is to act as steward of the company's assets. To say NO on occasion. (Like when some hare-brain wants to buy an internet portal for $7 million). Setting aside the expenditures on R&D, this company has spent $69,926,000 on selling and g & a for the years 2000, 2001, and 2002. During which period there was, for all intents and purposes, nothing really to sell. (Revenues for those three years - $1,471,235.) It is stating the obvious, but conscientious cost control during the start-up period would have made the past two PPs unnecessary. I've rarely criticized this man, but I think the evidence is now overwhelming. He ain't up to the task.
Alea: Can you direct me to this...
market research? "Wave Systems had some extremely positive feedback on this subject from a highly respected market test firm (they did the same thing for airbags, which is the original source of the comparison Wave keeps making). So we know something about this already, even if it's theoretical."
Perhaps I missed this report. I would be very interested in the details, if you can provide a link.