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Gip, be careful when looking at commodity prices as an inflation indicator. Globalization over the past decade or more has done quite a bit to change that dynamic. Plus, not all commodities are the same, so it's difficult to generalize, but many commodity prices have been driven by speculative price bubbles, rather than basic supply and demand. Additionally, inflation, in my view, if more of a monetary phenomenon than anything else.
Hey Gip,
I think we can both agree that deciphering Fed-speak is quite subjective and art rather than science. As someone who has paid attention to the Fed for quite some time, I can say that Yellen has historically been one of the most hawkish governors. I read recognition/admission of the potential considerable impact of the current downturn in her comments. More importantly, I read an acknowledgement that the inflation situation, which normally overrides all of her policy decisions, is contained (in the comfort zone) and getting better. That, to me, signals a green light that a cut is in the cards unless there is some material improvement over the next week.
I believe that headline is a complete misinterpretation of Yellen's speech. I read the full transcript and found her comments to be quite bullish for the prospects of a significant cut (i.e. 50 basis points) and additional cuts in subsequent months.
Frankly, it's the first semi-intelligent communication I've seen out of Murphy; although, I still consider his opinions of little value. He is right, I believe, about one thing in particular. As I've stated several times previously on this board, TKO is very, very unlikely to do $25M in 2007. In fact, I doubt they'll get particularly close. If the company could bring itself to clearly articulate its prospects, the short-term revenue situation need not be catastrophic. However, if the company continues to a handful of brokers and their clients to mis-set expectations, then we're all in for more pain. I've seen nothing to indicate that we'll see any substantial dollars from GE in 2007. My interpretation of previous PR's is that they don't even expect to begin selling a product until Q3. Given normal delays and overly optimistic forecasts, I'd be happy if they started selling something with GE in Q4. The other markets just don't seem to be ramping anywhere quickly enough to generate much 2007 cash. We'd be seeing many, many more announcements (with specific dollars) if that were the case. There is no reason why most of their target customers (other than government-related ones) would be shy about announcing specifics of a deal. I see much promise in all of the markets they are currently pursuing, but that won't be reflected in the stock until two things happen: they set realistic expectations, then achieve/over-achieve them. Management credibility and an ever improving track record of predictably increasing revenues is what we need.
TKO is being taken down by bad management and even worse execution, not market manipulation.
This deal makes little to no sense to me. Of course, very little detail has been released so far. If history is a guide, it will look worse and worse the more we learn about it.
Walt, if "waiting for a magic bullet PR" is what you've taken from my posts, you've completely missed the point. In fact, I'm saying almost the exact opposite. People wouldn't be frantically hanging on every data point if RP and company were more effective at managing expectations. For example, I believe there is a very, very slim chance that the company is going to come any where near $25M in revenue. That need not be a catastrophic event for investors if we/they were given more context for the performance. You seem to be a pretty savvy guy. I don't think you really believe that given this company's track record of reality almost never being in sync with the company line that it is sufficient to throw a few numbers over the wall and expect everybody to blindly wait around for 12 months to see if it's all going to come true. We've all heard the grandiose proclamations and intimations in the past. Heretofore they have been nothing close to advertised (which is not terribly unusual for a company at this stage). If the company truly believes it can achieve $25M this year, then there is a reasonable amount of additional color on its progress that it should be able to provide. If it can't, it's hard to draw any conclusion other than they are operating on a wing and a prayer.
Gip, I agree with your comments. This board has done good work on a number of fronts. It has had to do a lot of heavy lifting because of manamement's secretiveness and disingenuousness. No company can be 100% transparent (or anywhere near it). But there are responsible and sophisticated ways to manage the flow of accurate information. If done skillfully, investors can be made to be quite patient. My point is simply that I don't believe the company and its indirect proxies realize how much damage they do by playing loose and fast with information.
Of course, a real revenue breakthrough would go a long way toward reducing the immediate term pressure. Short of that, I would certainly derive confidence from a major ($5M to $10M)cash infusion by Pickett and Musser (without terms onerous to the investor base...i.e. a simple loan at 6% to 8% with little/no warrant coverage). It's certainly not my position to tell anyone else how to spend their money, but that would be a reassuring move for a very jittery group of investors.
For the three years or so that I've been in this stock I've never understood the dynamic of emails we've seen from Walrus and GLL (and others) dozens of times. We all know the company regularly leaks information to a handful of brokers who in turn share that information with their clients. Many of us, myself included, know one of those brokers and thus have access to this "information." Unfortunately, as many of us have come to understand, the leaked information can be interpreted as nothing more than a ploy to calm the restless masses. But, as we've learned, the masses are never calmed, because the expectations that are implicitly or explicitly set with the cryptic and oblique messages that the company and its investor messengers hint at are never even remotely in line with what actually happens. As such, investor confidence (and the stock price) erodes more and more. I submit that by not keeping quiet entirely or saying exactly what it is that you've heard from your source, you are contributing to the death spiral of mis-set expectations. Let all see and evaluate the information for what it's worth and make decisions accordingly. Perhaps then management will recognize that the best course of action is to communicate directly and forthrightly with its investors and the analyst community. There is no logical reason that you should enable this ongoing management gamesmanship. The fact that they selectively share things with a few means that it should be available to all. Anything less is unethical and improper.
This specialist manipulation rhetoric is pure nonsense. It's nothing more than a smoke screen to obfuscate the remarkable lack of communication and poor expectation setting by management. I am long 76K shares and obviously have a vested interest in seeing the stock rise. Unfortunately, I don't see that happening until management starts to communicate directly, set reasonable expectations, then consistently achieve/overachieve them. Filling the heads of a handful of brokers with overly optimistic and speculative information, then having those brokers disseminate that material to clients who are anxious to believe anything positive, is no way to manage an investor base. People are largely convinced that the technology addresses a need and that the market is substantial. It is the gross lack of confidence in management that is the biggest drag on the stock.
The specialist and Think Equity's of the world are not the problem. A deft management team would be able to finess each of those situations. Frankly, I haven't seen anything from Think Equity that isn't a legitimate, if not biased opinion (just as my and other longs' opinions are biased).
Let's spend less collective energy enabling management's continued mis/non-comminication and excuse making, and more energy pressuring them to share the facts and establish a pattern of expectation setting that builds investor and analyst confidence.
That was my point. They are in no way precluded from sharing any of the type of information you mentioned. Apparently, they simply and mistakenly choose not to.
Complete nonsense. They are not prohibited from releasing news. Over 150 companies were/are under investigation for options backdating. Do you think all of them have been quiet during this period?
EDS...Remember them?
They posted a very strong quater. Below is the TKO-relevant bit of info from their just released earnings.
* U.S. Government: Fourth quarter revenue was $825 million, up 10 percent compared to the prior-year period. Operating profit was $191 million, up 58 percent from $121 million in the prior-year period. Revenue and operating profit increases were driven in large part by the improved performance of the Navy Marine Corps Intranet contract.
It would be interesting to know what TKO had to give up in return for GE's exculsivity pledge. I'm sure a look at the deal covenants would be quite illustrative. It certainly would not be unusual, given GE's commitment and TKO's relatively small size, for GE to require a right of first refusal on any acquisition solicitation that TKO might receive in the future. The slight downside to such a deal term is that it can dissuade others from making a bid because they assume the ROFR holder has the inside track and holds the trump card. It's also possible that GE may have requested board observation rights so they can look under the covers at TKO's finaincial health. Of course, there are many other possibilities. Nevertheless, barring some absurdly onerous term(s), this partnership has to be viewed as a large net positive for TKO.
The Clinton surplus was the byproduct of the confluence of three of the largest bubbles in modern history--Internet, telecom, and Y2K.
Let's keep this board focused on TKO.
Chaos, I hope you're joking. BPL/PLC does not threaten Cisco's business. If anything, it's a positive for them because it makes Internet access more pervasive and therefore puts additional traffic on the net. The more traffic on the net, the more equipment they sell.