I'm going to toss out some of my thoughts on GUIDANCE!
We ALL expect great things to show up in TKO's guidance for 2007, but I'm not very sure expectations will be met, just like the previous announcements which were already built into the share price. Here's my thinking!
Custom product builds (like GE's) are more expensive than you might imagine. For a small company like TKO, it means added engineering development, perhaps new production line set-ups at their off-site suppliers, increased inventory expense and service support. In other words, it strains an already meager cash flow... and unless GE is paying up front, revenue is AT LEAST six months away. Margins are likely to be THINNER on custom products than their standard products. I've experience this first hand. GE also has a track record with Astropower (solay panel manufacturer). They bought the assets of APWR when they went bankrupt to form the GE Energy division.
We also don't know the financial impact of the two new companies on revenue and earnings yet. Absorption plans and duration for integration of management, accounting, sales, and administrative will be time consuming and a financial drain until accomplished.
Lastly, TKO management's competency will be tested on the operations side of the businesss. (They seemed to have done well on the financial and product engineering sides thus far.) The fact that manufacturing is outsourced, however, could be a disadvantage.
I'm sad to see Walrus and GLL taking sebaticals as we enter the ramp up to 3/8. Their imput would have been helpful prior to company deliverance of information.
Just some thoughts... any other opinions?
