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Friday, April 19, 2024 7:46:08 AM
1. I don't think we got played, I think, more than anything we got delayed. Hypers, in the US in particular, have been trying their darnedest to continue with passive copper for as long as possible. I think that caught S7 by surprise, and I honestly think they thought that they would be part of the upgrade cycle at 25-50G and far sooner than 100G in H2 of 2024 (maybe).
2. Now though, hypers really don't have anywhere else to go when it comes to copper at 100G and 200G so they are turning to ACCs. There are multiple ACC vendors - Macom etc. - but I feel that S7 specs and performance is superior to its ACC competition.
3. But that problem again - delays. 100G would have rolled out sooner if it wasn't for switch issues (Tomahawk) and the rest of the network had to catch up while ACCs waited on the sidelines. For a small, focused company like S7 that meant raises and dilution.
4. Now they could have handled their finances better, I'm sure of that. And, I'm not giving RH much credit - although he could raise lost of money in the past - I don't believe a word that he says and I have a paper trail to show it but a CEO on the Venture who has to deal with continuous delays has to be as much a used car salesman as a CEO. Things always take longer than you think.
5. CEO compensation was excessive for what was delivered. Also, I am pretty sure parts of mgmt haver lost credibility and lost the confidence of the market and if S7 gets out of this mess in one piece, I'm guessing they will be headed by a new CEO. Like a hockey team that misses the playoffs, the coach is the one to go.
6. My understanding is that S7 has a valuable patent portfolio and a very valuable engineering team. Don't forget that. It would be very hard to impossible to assemble an analog design team like theirs in a short period. Remember, a good engineering team is more than just a bunch of people put together - their time together and shared experiences during that time add tremendous domain knowledge and expertise. Any company wanting to get into this ACC space would be far better served buying a ready-made, experienced team, than trying to assemble one in this tight market. The patents are worth tens of million and the team is worth tens of millions, maybe more.
7. I really don't think these guys are scammers. CEO may be over the top when it comes to promises and setting expectations, but most of their team including mgmt are long time engineers or techies who have worked in the valley for some very large and established companies and they are just trying to do a good job. That's my opinion, but hey I may be wrong.
I was invested in a TSX-V company years ago called TIR systems - they were and R&D company, had essentially no sales, they were developing solid state lighting (which is EVERYWHERE now) and they had run their course in the public markets (couldn't raise anymore - the taps were drained). But they had a good team and a solid patent portfolio. Phillips bought them for $75 million and absorbed their engineering team into their LED lighting division. My understanding is that members of that team and the patents enabled Phillips to bring the LED lighting that you see in Home depot to market.
This is not an endorsement to buy more. Do your own DD. Good luck to all.
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