While on the topic of shareholder communications, does it bother anyone else that Huff was discussing the share price and volume at the conclusion of the most recent letter to shareholders? I know we are all here to make money, but doesn't it seem a little unprofessional for the CEO of an early-stage company to be emphasizing the stock performance at this point? In my experience, the issue of stock performance is usually addressed by upper management with something like "we are focused on executing our business plan, and shareholder value will follow". I just hope that a higher near-term share price is not at the heart of their business plan.
And regarding profitability in Q2, note the wording in the shareholder letter:
"Our margins in the carrier business have grown substantially in the first quarter and this is what drives our prediction to reach profitability by the end of the second quarter. This will be the goal for the GlobeTel business unit excluding the Sanswire business unit. For a telecommunications company to be profitable while it is still in the development stage speaks highly of the team assembled here at GlobeTel."
To me, this implies that they are predicting profitability only for the telecom business, NOT for GTEL as a whole. Unless the Sanswire unit brings in significant revenue from a deal struck between now and 6/30/05 (two quarters before they expect to have a commercial version completed), it is likely that the expenses inherent with the Sanswire business unit (including the salaries of all those new high-caliber hires) will keep the GTEL EPS in the red well beyond Q2. The fact that they appear to be creating something of a fallback position here has me a little concerned.
One more thing about the shareholder letter. Now they are telling us this:
"We announced our plans for the prototype in the fourth quarter of last year with a launch date in late January. This date was pushed off to accommodate design changes and provide for better materials to be used for the launch. It also was pushed to give us corporately, more time to find out the needs of the markets we intend on servicing. The date for launch was then pushed to a window of the last week in March."
But in January, they were telling us this:
"The Partners and Technology Summit, previously scheduled for January 20 and 21, 2005, has been moved to February 20 and 21, 2005. Further, as a result of the increased interest and rescheduling of the technology summit, the launch date of the Stratellite prototype has also been rescheduled for March 25, 2005. This move enables the company to accommodate scheduling issues with attendees and to ensure that all issues are fully addressed prior to launch."
Now, while the earlier explanation may not have been technically wrong, it certainly didn't mention anything about design changes and better materials. I remember that when I first read that release in January, I thought that they were probably skirting the issue that they wanted more time to finish building the thing right (I think I even posted that concern at that time). Why not just tell us that? As others have said, it would be perfectly natural, even expected, to have some delays when working on this sort of project which has never been done before. Why do they feel the need to sugar-coat their press releases?
Please don't take this the wrong way - I'm not bashing, I'm buying - but I don't have my head in the clouds either (at least not yet), and I do have some concerns which I would like to discuss in an open forum. Hopefully such concerns are not discounted in favor of blind faith.
AI
