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wavxmaster
We could actually completely fill a new bulletin board with all the messages we've written over the decade about the last chance to buy in this low or wish I wasn't short etc. Granted all the recent anectdotal information seems more solid than in the past about demand and that article was one of the first I've seen that actually and unequivocally says good things about Wave's products, but breakeven on business in hand wasn't exactly short on potential either.
I do agree that if Wave shows that their hi margin products are being bought in large quantities with the expectation that this is just the beginning, your spring will snap pretty violently. And the success of the Red Sox in 2004 demonstrates that anything can happen despite past history.
Hopefully the next months will remind us of early 2000.
TTT
Wave tried long and hard years ago to engage the cable industry in the possiiblity of using Embassy to manage applets in set top boxes thereby providing a much lower cost to everybody since the STB could be used for a variety of cable sources instead of needing a different one for every provider. In fact some providers needed more than one type of box after they added companies through acquisition. But it never happened (yet)
Ramsey
What is not known thoroughly is how these two companies went on to their own track at the outset. With IBM, Wave has admitted that they were not ready when IBM started (partly becuase they did not think they were serious). With HP the only public thing we heard is SKS' comment that HP didn't know what they were doing and when they tried to use Wave's stuff nothing worked because they didn't understand what was involved - so they took a simple and easy first step that wasn't nearly as good. He always took the point of view that when HP was ready and had their act together, Wave would be in.
Now what we really don't know is what really happened. Wave's inability to get bundled with the two may indeed be simply that they are unwilling to take out their own brand without an absolutely compelling business reason. And/or there may be some relationship issues that remain from the time they didn't connect in the first place.
Matt
To be more precise, I would say that Hitachi and Wave have discussed the managing of FDE devices and the approach used for Seagate. There is no specific public acknowledge ment nor evidence that Wave has engineered a solution for Hitachi. Sure you could raise very good reasons why it could and maybe already did happen but I would put that in the probable category instead of doen like Seagate.
The timeframes for these deliverables has been so extended (or maybe its becuase we follow each step so closely) that Hitachi must feel it has time to see how th emarket develops and what the storage specs are before entering the market place.
scorpio
What is the value of failure to an investor who invests in a failed company?
There are many perspectives one can examine the Wave story from and I would hardily agree that there are a few that have been quite educational and have provided a somewhat unique look at how new things emerge in the market. If I were to do this again, I would be immensely more informed than when I started on this journey.
Unfortunately I may also be poorer from an economic viewpoint as well. My previous comments were from an investors perspective - not one who is watching markets evolve. If I fully understood how long it would take for the market to form then I would have treated Wave like a drug company with potential products that must be developed and go through numerous tests before it may be a blockbuster 10 years later.
Dory
One troubling aspect of your memo is the rationalization of why Wave is where it is today. If we could have considered the market a couple of years back, identified critical success factors and concluded they would start selling products in 2008, things would be looking good and on track. Hey if they could have done that,they probably would have had a different financing strategy.
But your comments, while rational, are after the fact and rationalize a result. We've had similar scenarios explaining other defferals of sales before. And with this as a track record, we could have the same descriptions in the future. While the bashers have termed this moving the goalposts in a derogatory manner, the substance of the criticism has some validity - not as excuses for Wave progress but as a concern from an investment standpoint.
Do you have a story for next year, if the market is just slowly moving along and companies are managing FDEs without TPMs and without Wave?
Zen
Based on history, I would say that they had several pilots in the stage which they thought would close with a firm order for upgrades. It only takes one or two large enterprises to get to tens of thousands. They apparently did not close as expected and since there were only a couple in question, it turmed into a zero.
Whether he assumed that the deal hinged on including the FDE or not or whether the almost availability of the FDE actually caused the deal to be deferred is something only a few know.
By now I would think it is obvious not to rely on most of Wave's predictions for hard facts - there is still value from a qualitative perspective but only if you think about what is said. As for guessing the reason for the size of the placement, one can make up bullish or bearish reasons. Again other than parlor games, I think most people have more productive things to do now. Watching and waiting for Wave is clearly unhealthy. Unless you are actively trying to trade, you'd be far better off following it less and reading the boards once in a while.
While it has been an education about many things inclduing arguably the emergence of a whole new computing framework, the knowledge we gain is not sufficient to predict wave's chances of success. There are obviously so many variables that almost any outcome will be able to be rationalized after the fact.
Ramsey
There are options available today which can be granted now at current prices. Are you of the opinion that they will grant large amounts of options immediately following the approval of the plan. And one day matters more than the next? I would hope not. This is supposed to be a long term situation with options granted at appropriate points based on a compensation system - not a land grab to get a low price.
Your focus on one versus another suggests another perspective.
New wave
while I don't dispute there are a number of positive opportunities for Wave ( this has been said every quarter for years) and that this could be a good buying opportunity (this has been said every quarter following some drop for years), I actually don't see how this placement seriously alters the buying decision.
The amount received covers two to three quarters depending on the spend and the cash received in the future. If I were making a major decision about my architecture and was actually concerned about wave's viability as an ongoing bsuiness (and I am not convinced this is a real issue if they are coming in as a partner with dell for example), having 6 to 9 months of cash and no noted revenue (except from me) wouldn't remove the concern.
All in all these sequences of financing events are not that surprising if you followed the stock as closely as we do. And the remarks from investors and remarks from bashers are equally predictable as they occur with almost a precise frequency after each event.
I for one continue to wait to see if all this opportunity will translate into success and the financial benefits accrued will be tied to how quickly the space evolves. So far these delays just cost us money (selling shares at this price costs money despite protests to the contrary) but the distance to the end of the tunnel appears to half each time. The question is will we ever get there?
Yes
There are things that could give us more time but fundamentally the business model has to be proven (not assumed).
There are three big questions about it: will it happen as envisioned, what will the real market pricing be when realized and will another major player come into the field when the opportunity is more tangible?
Dependingon the answers to these questions, Wave will prove to be a successful or unsuccessful investment for most.
Ispro
No one doubts that Wave's revenues will grow for a while on the basis of the bundling/licensing deals simply because more machines are being sold with TPMs and Wave's supporing software. But if that's the full deal, Wave is over valued.
Most are waiting to see proof that their business model of selling full software packages (upgrades) and server/network support for multiple seats licenses will succeed and that the per seat revenue earned by Wave on this aspect of the model is even close to the amounts that are bandied around.
If both are true and no other gorilla steps in, then Wave is vastly undervalued. And then we'll worry about someone trying to buy them.
It's pretty much as simple as that.
Go-Kite
Is it the Stockholm syndrome whereby the hostage identifies and feels gratitude with the hostage taker.
I also found the reactions interesting. It is positive that the terms were changed and at this point I think fall within a reasonable albeit upper bound. If this was the original proposal, while there would have been discussion, it would not have generated nearly the level of negative reactions. (I just assume they cut back on the director grants as well.)
We can now return to waiting for our sales to start.
Larry
You are becoming too much the focus of these discussions and issues. I would suggest that you really consider what you are typing before doing it or you will just set yourself up for another dozen posts. I am purposely not responding to your bizarre comment but believe it or not I don't win if the share price falls.
Barge
I actually find it implausible that Wave would need to hire even 100 engineers in the short space of one year. I'd go on to say they would be incapable of more than doubling their size instantaneously and I could guarantee that they would be unable to manage that process on every level. Before you faint, I could substitute any other company name to this statement and it would hold. The notion of such an increase is simply not of this world - but you did say that one needs to have an unworldy view to follow and understand this stock.
Barge
Your comment may be true but Wave's response to questions was that they hadn't given the numbers much thought and were trying to get them to look like 1998. They wanted enough headroom to 2014. They may need a lot if they hired the head of some geography. That they would never actual use the amounts they are asking for, That it would cost close to $40,000 to modify the proxy. The Dave Collins response is not listed here because it was incorrect but I hardly view him as a source of accurate information. Their reasoning for the proxy doesn't seem to be that compelling to me. Remember the no vote is not to have no options but a better thought out amounts tied to actual need.
rick
Insiders are continually privy to non public information (which is sometimes amterial) and it's the combination that creates the concerns and issues. Since they are continually privy, the real world guidance is to not buy or sell right before an event. So it is conceivable that one could not buy or sell during a particular period of time.
It is far fetched to think that becuase you are always in potential mode that you can never act. It becomes even more far fetched when in fact nothing of huge substance has happened very often and with wide periods of open space. Although buying and selling can be problematic, Its my beleif that selling before a big issue becomes public is more often than not the troubling transaction.
With the option example you raised, excercising and holding is a complete non event. The right to buy the stock was inherent in the option and the value accrues whether or not you actually excercise before or after an announcement. Excercising and selling before a big negative announcement could presumably raise some eyebrows. This was an element of the complaints following the Intel and IBM announcements a few years ago.
Rick
I can guarantee you that if any employee including management ever excercised their stock they would be able to keep it forever. There is absolutely no problem here. Rememeber they have the right to buy the stock during the option period. Although I would be tempted to say that they probably could sell the stock as well, you could probably construct a scenario where selling it would could be problematic. This is exactly the opposite of what you are suggesting.
Also although management has indicated some concern with buying stock becuase they are continually privy to great deals that are about to become true, that position seems difficult to support forever. Now perhaps if there was a deal of importance often, we could at least debate it. But in the last 6 months for example, the request for more options is one of the biggest announcements. Over time their position seems less and less credible. Had they simply said that between my job and my existing stock I have my life invested in Wave and thus I am not buying any mor eon the open market, you might diagree with the decsion but believe the statement.
Snackman
I know your memory is better than that. When Wave is at $10 it will be close to the price (post RS) that I first bought it back when the days when cell phones were novel (I think they were invented back then). Except at that time $450 million market cap would have been a big gain. Why reaching this level is a big milestone is beyond me. Giving away 1% of the company is still givng away 1% of the company.
Barge
Just because it is written doesn't make it a fact. There have been ample reasons given that the numbers are simply too high and out of line and unecessary. Just because they may not be abused doesn't mean that it doesn't matter what is approved. Also I am completely convinced that management will use options liberally to address or mitigate any other HR issues which may arise. So people can be over compensated without it being construed as a scam, front running or whatever. They do need some stock for attracting and retaining key employees but there is a right number and a wrong number.
Sometimes I wish you were my supervisor for performance ratings. Although I do believe there have been some very smart moves to position Wave where it is with regards to trusted computing, I would also point out during the past 10 + years, there have been moves and strategies employed that deserved negative appraisals and that seems to be missing. People were well compensated and during their watch:
HP did not deploy Wave's software despite what might seem good access to the right people.
Wave by its own admission wasn't ready when IBM moved with TPMs and they lost that connection.
Despite numerous discussions and opportunities they never secured a deal with the networks or cable providers for Xpress.
They bungled the Embassy dongle developement and then threw it away without any explanation after spending a lot of money and resources.
Ishophere decisions may have been influenced by personal relationships and certainly appears to have been a stupid business decision.
They carelessly spent money when it was there not being prepared for delays and thus have needed to operate on a shoestring budget thereafter adversely impacting our ability to capitalize on opportunities and relying on others to do our selling.
My point for summarizing these examples is to illustrate how some are quick to throw praises and reward based on some hope and potential but don't focus on the lack of execution which can't just be passed off on trusted computing delays.
If Wave's compensation philosophy doesn't fairly reflect these items, why would you expect the future to be any different with the same people and the same guidelines in place. They don't think they are doing anything wrong but that doesn't make it right.
tkc
Although they have lots of flaws, there are a myriad of examples of CEO's and Boards that are far more greedy, crooked and not concerned about shareholders (other than themselves).
Who are we kidding?
If management thought the proxy was a mistake they would change it. If they can convince folks to approve it, it demonstrates that it was fine but it took some better communication to get it approved (thats the positive) or it demonstrates that when push comes to shove shareholders will just not want to go against management regardless of the merits of the proposal.
I do believe Hackshaw (or his wife) solved the mystery. I doubt there will be (m)any who will take the time to submit a proxy and then abstain from voting on the issues. So if you want to have a say on this, you got to submit the proxy or come to the meeting and vote there.
Micro I'd be interested in knowing the magnitude of the stock incentives that Wave thinks they need to pay to attract and retain employees. I remain totally unconvinced they need anywhere near what they have asked for. But I am also sure they can use it and still be well below the threshold where one would claim some fiduciary failure. Overpaying in stock is an easy way to address other HR issues and once approved there is nothing we can do but "rationalize" again.
OK
Running out of posts so I will wait until tonight before any more.
The option plan authorizes shares to support the granting of options but those shares are not voted. See my prior posts on employee stock ownership plans.
Even if they were granted, they can't be voted until they are excercised.
The only way this could be used to discourage a hostile takeover would be to grant them and see that the plan calls for them to become vested upon a takeover. That does apply to SKS but I am not sure if it applies to every employee. I also don't think management could do that unless we had approved this type of action as a poison pill. And that would only make a takeover more expensive not necessarily stop it by a vote.
Having received a couple of messages about voting, I am convinced there is a misunderstanding about how this vote works - and unfortunately it is between messages from the company and what the proxy seems to imply to me. Sounds unbelievable but that seems par for the course for this discussion. The isue is "no vote" and the no vote. Count or not count in determining majority.
OK
I hope you can now see why this is so unclear. In the explanation provided to you, you would think that people who don't vote aren't considered to have voted. The proxy suggests that if you don't vote, that is the same as actually voting no (at least in the counts). That means that of the 42 million shares outstanding, a very high percentage will be considered as having voted. Since we are bandying around 25%, instituions are 10%, employees are ? (think they want the options?), that certainly leaves a big silent majority.
This is an incredibly important point.
Tiny
It is precisely that thinking that has allowed anything to go on. Quoting from a famous philosopher " our own greed is their leverage".
The returns could be infinite. Or the institutions could agree to a deal to take the company private after they triple their money leaving us saying "how could they do that to us?"
Bucket
My experience was just that. Now it is possible that certain types of proposals work differently (like the options). I assume that any variations would be attirbutable to the state law of incorporation but without research I defer to our security law specialists on the board. I assume we have one of everything (limo drivers, golfers, actuaries, cpas, homemakers and even CEOs)
Snackman
My question (which seems that you are answering it) was whether not voting is the same as voting no in terms of this proposal and if this was the way share votes usually work. Since I assume most people don't vote their shares, it would seem getting over 50% of the votes affirmative would be a huge and uncertain task. In this situation getting 50%+ voting yes hardly seems like a slam dunk. Does that also apply to the directors or just the option plan. Hard to believe the directors would get a 50% affirmative vote especially since they and management don't own that much.
John
I read that but am confused. I thought this was a vote of yes versus no. Is the text correct - not voting is the same as voting no. I find that hard to believe as I would be surprised if over 50% of the shares actually voted either way. Do they actually need 51% of the shares voting yes? Is this the way it always is?
Barge
I truly think that the right individuals on the Board would have been incredibly helpful to Steven executing his vision for the company. Better planning and prioritizing with less emotion could have Wave in a far stronger position vis a vis achieving a commercial success.
Sure there are scenarios which might have lead to wave's premature demise or their takeover by somebody else (but at @$25 who cares). But I really don't see how the record of many tactical decisions and the planning for a future that didn't occur demonstrates that their is good solid business guidance provided.
Although you imply this, I do not equate having a better board with tying Stevens hands in a way that stiffled him. That would not be an effective Board either.
escrow
There is more than one way to interpret these comments.
SKS and present management is unbelievable. This is like a Cinderella story.
This is not about second guessing as the objective of the conversation. We are discussing the actions and results that have occurred over the years in order to assess the effectiveness of the board in this case. If you think the Board has been effective in guiding the company, then you will clearly think they should remain and continue doing what they are doing. (sorry I should also add if you think they presently have the required skill set to do what is needed in the future). If you think their actions have not been good or effective and believe this is a strong indicator of future outcomes, then you would want new members included and possibly some removed.
Shareholders only have a few ways to influence a company and voting on the Board and proposals submitted by the Board are the major ones. So a discussion about these items even if it is the white elephant sitting in the room is good and appropriate.
Absolutely
With proper business planning, we would have conserved resources and been able to use them to exploit opportunities. Wave has been working with one hand tied behind its back for a long while.
Better relationship building with partners.
Better access to funds when needed.
Better oversight and alignment of compensation with shareholders.
Better sceanrio planning in case best estimates don't come true (like every time)
I could go on but in my opinion there are lots of capabailities required to run this company. Steven has some critical ones and there are som every strong people on the technology/vision side. But execution in a commercial world is also critical for the investment to be successful for outside shareholders and this is where I think the board has failed.
Barge
Barge you are completely missing the point deliberately or because you truly don't want to think about the business aspects of this discussion. Effective board members would provide strategic business advice to Steven, help in prioritizing the use of scarce corporate assets and also assist with making connections in the business community. SKS has some very good skills (technology, vision, chutzpa) but from my perspective has certain shortcomings as well.
It is truly unclear what the current Board has contributed (at least in this decade)and by their seeming acquiesence have allowed lots of things I believe inappropriate to happen.
There used to be an expression that some of us had " we hope Wave can succeed in spite of themselves". We are banking a lot on the fact that their products are unique and critical for internet based services to work in the future and that as long as they can provide them they can't shoot themselves in the foot. I have accepted to some degree that angle for many years - but the validity of that thinking is constantly challenged.
Ramsey
I spoke to my compensation consulting colleagues but our data generally ties to larger companies. But in all the surveys I read, the ration of options (paid out plus avaialble)/ total shares outstanding is below 20% for essentially every industry. Wave's allotment would be 20/40 or 50%. Soemtimes the ratios are based on fully diluted shares and it would be 20/(40 + 20) or 33% which again is well above the outer limits of 20%. Also distribution rates have dropped from 2.5% to 1.5% as many companues have been reducing equity incentives or changing them to restricted or direct stock grants. If Wave even contemplated 2 million shares per year that would be 2/40 or 5% again well above the norm (and we both know who would get a big percentage).
I don't think we need to excessively parse this or we lose the key messages and decision points. Are the proposed numbers too high? Will lower numbers still allow Wave to compensate their key employees as needed? Are their guidelines and criteria to ensure the compensation is fair to shareholders? Will a delay and a vote on another proposal harm and help the company?
Alea
No they got an increase to 12,000 options per year plus pay to show up. Are minutes of a Board meeting ever public or only when a criminal case is underway and the info is leaked. It would be fascinating (or maybe sickening) to read about what they discuss and how decisions are made.
Fair compesnation
During a number of conference calls when someone has asked about the per capita expense levels (you know 16 million+ divided by 100 or so), Steven has made a fair comment that since Wave was primarily hiring engineers in demand they had to pay top dollar - the group is relatively senior. We don't know precisely the pay levels but you expect it is market based, we do see what some officers are earning. Therefore when one discusses options, you should keep in mind that no one has to be overly incented because that is what is done to keep IT folks engaged.
Also there is quite a bit of talk about returning back to 1998 but I would question why? Who said that the authorization of 1/3 the company for options was appropriate? Who said the levels were appropriate? They were what they were (I don't believe many of us affirmatively voted for it and I should add in an informed way) so why should that be the standard to be used now?
In conclusion this is not a discussion of whether options are needed or if the pool needs some replenishment(we could discuss trends in compensation today but I don't think it would hold much interest)but rather the amounts being asked for employees and directors and the authoization itself is appropriate for now. And to some degree whether shareholders have the wherewithhall to study a proposal and sometimes say no to management instead of deferring to all its recommendations. Wave is not unique to these discussions but they are germane to this discussion.
?
Is it worse to think there is something sinister planned than to believe they issued a proposal to materially increase all of the option limits without giving it much thought because it would be like 1998 again. I sort of enjoyed 1970 myself.
Actually the image I have now is Feeney explaining to Unclever how he is underpaid and under appreciated since recruiters are offering 3 times his salary for a different job (and he didn't think about the options levels?)
Snackman
In 1998 they were a tiny company with a dream and the use of options was wide spread and quite frankly abused by many companies (they did not need to expense it and investors were fat and dumb with profits and somewhat naive).
This is 2007 and the proposal was not well thought out at all. (At least I hope that is a fact). I just don't see today like 1998 and Dig made an excellent point of cash or options not both. We are not an IPO and whatever is needed to succeed is largely in place for the moment.
I just want an appropriate proposal that makes sense to me and I don't feel like it being changed is going to doom the company. If that were the case, I think we're toast in any event. And maybe just a little bit of me doesn't want windfalls to occur (and windfalls are in the eys of the beholder).
Dory
We are voting on a proposal that some of us think is inappropriate because it is too large. Can anyone show me a company today that has over 1/3 of its shares allocated for employee stock options. How many have 1%+ being available for annual distribution? Do you really want all those shares to be used if it results in excessive compensation.
Sure there is lot of built up feelings that are being expressed but at least for me, if the proposal made sense then I would vote yes. And literally nothing that has been said by management has made me feel better about why the proposal makes sense. And in answer to your question, I would not agree to authroize way too much in my opinion if some things that had been promised or projected actually occurred. Believe it or not, there are actually companies who make forecasts that come true (at least once).
Tim
Please don't forget that the director allocation should not be stepped up as well. Imagine if they were lured away by a better offer from another story stock CEO?
Snackman
I completely disagree that defeating the proxy and inidcating that a smaller amount be authorized and the annual limits be maintained for employees and directors will adversely impact their ability to do a placement.
The placement people are either only in it to flip it (and don't care) or wish to remain invested and they would view this the same way as us. Do they want their investment to become overly diluted?
Perhaps you believe this vote has something to do with authorizing shares for other purposes? I don't think so. As for harm to the brand, if there was, it has happened. If it indicates there is some control and oversight from shareholders, that sometimes is a plus not a minus.
And finally, do you think their ability to close the sales which are "hot prospects" or part of the Seagate rollout are going to fail becuase of this? I would hope not.
Snackman
This is pretty embarrassing. They rushed out a proxy which essentially only contained a vote on the option plan and gave it so much thought that they got it wrong? Assuming that the CFO is pretty much on point here, it sure sounds like we should give him another several thousand dollars of options - I've heard he is getting offers at 3 times his current salary from recruitors.
Before I end, I realize we never wrote much about the directors - but they also had an increase of 3 times the offering - but the good thing is they recommend that we say yes. They must also be getting lots of offers for other directorships.
At least we can impact the vote if there is sufficient consensus. It certainly makes no sense to vote it in just because they would have to resubmit another proposal. And keep in mind, many wanting to vote yes say the proposal is too high and management apparently concedes that they did the math wrong. Do two wrongs make it right?