The Titantic - aka OVTI

I admit it. I was wrong (OVTI Prediction - Write it Down! ). Herb Greenberg was right. The people talking about insider selling at OVTI were right. It was not a pretty quarterly earnings report.

• Revenues grew 43% Y o Y ($136.7m)
• Revenues grew 4% Q o Q
• Earned 28 cents a share vs 39 cents previous quarter and 25 cents last year
• Would have earned 39 cents without Fas 123 R (The World According to GAAP )
• Gross margin shrank from 36.8% to 36.3% Q o Q.
• Guidance for 2q07 is $135m to $145m in revenues and 12 to 20 cents per share.
• Guidance x 123R would be 26 to 34 cents.

That guidance is the most worrisome item. They expect equal or higher revenues in the current quarter yet they're going to earn 12 to 20 cents a share versus the 28 cents??? It doesn't take a math genius to know that more revenue, but less profit ==> you're selling your goods more cheaply or your cost of goods sold have increased. Where is that Alka-Seltzer I bought yesterday?

I did get some good news yesterday evening. PAY announced banner earnings and went up 10% AH. Now I do not own PAY, but as steady readers may recall, I do own LPMA and increased my stake substantially yesterday in a play on JG's book, "You Can Be a Stock Market Genius" as PAY is trying to close a deal for LPMA. PAY commented about the deal:

"We are expecting to close the acquisition of Lipman Electronic Engineering Ltd. by November 1, 2006, and remain confident that we will receive clearance by the United States Department of Justice very shortly. We remain on track to deliver another year of outstanding results and we remain confident in our long-term model, which calls for annual revenue growth of 10 to 15% and annual adjusted net income per share growth of 20% or more."
"Based on our confidence with our near term and long term outlook, we are raising our FY06 year end guidance to $1.07 to $1.08 of adjusted net income per share. We are also raising our FY07 guidance to $1.40 to $1.42 of adjusted net income per share, assuming a November 1, 2006, completion of the Lipman acquisition," continued Bergeron.

I think the $29 price for LPMA is solid. And with the guidance, it could even move up if PAY jumps up. $29 would be a 16% gain for me, that would be great for a two month investment... just like JG wrote in his book. And as I like to say, "My Feet Are Smiling" as I have a much larger stake in LPMA than OVTI.

Not So Peerless

One company that has been on the 50/50 list for a few months is Peerless Systems. They provide imaging and networking technologies to the digital document market. They have gotten absolutely hammered. They were steadily about $6.50 a share back in June. They closed yesterday at $4.00. Today they are down 25% to $3.00 on disappointed earnings (I feel their pain).

The MFI question... is this a buying opportunity? I think my first step would be to estimate whether they're still an MFI stock with the new quarter tossed in. Then I need to make sure the stock has formed a bottom. I know, I know, you'd think with OVTI that I had learned my lesson on tech stocks. But I am a glutton for punishment. More to follow.

LPMA update: Great jubilation! Up $2.80 today, over 11% gain. That'll do, that'll do.

DRYS update: Thought I'd sneak a peek at DRYS, it is down a bunch to $13.50 (remember I sold at $13.67). It was interesting, they had a pdf of their presentation to analysts (). In their presentation, they were (of course) trying to make the case for why DRYS is a superior investment. The one point that really struck me was the YTD importing of China. Per their chart, they stated that China has imported 40% more coal that the previous year and 20% more Iron Ore. That is amzaing! Of course, if that sort of growth continues, perhaps owning some ships carrying dry bulk goods is a good idea. But also, what are the implications for coal & iron ore producers? Remember, I have FDG in my portfolio and they ship meterallugical coal to China. Hmmm... coal prices will likely move up sharply if we even have a normal winter.

The day is winding down. About time to update "the graph". Today was not a great day for my MFI portfolio. Made a little bit, but nothing like the market move. OVTI (down 7%) and PNCL (down 5%) really hurt. I can't complain as my overall portfolio was up driven my LPMA.