#C= Posts 2Q results 🙁
41 messages in this thread
I just saw the AP wire right here on CompuServe with some rather startling news
about C='s latest results.
I can't quote the entire message due to copyright, but I can quote a section as
part of a "review" of the copyrighted work.
—————————————–
AP 03/25 19:16 EST V0155
Copyright 1994. The Associated Press. All Rights Reserved.
NEW YORK (AP) — Commodore International Limited, a pioneer in home
computers, painted a grim picture of its future Friday as it reported another
quarterly loss.
Commodore warned that, without additional financial help, it could be thrown
into a reorganization or liquidation proceedings. It is trying to negotiate a
restructuring with creditors.
etc, etc, etc.
—————————————–
The article went on to talk about losses from the quarter ending 31 Dec v.s.
the same quarter a year ago. The ratio of loss to earnings actually improved
by three times. I took this to imply that CBM has a more efficient structure
now.
The bad news was that earnings also went down to 1/3 of the previous level.
I encourage others to read the article under the Business News portion of the
AP wire.
They also talk about weak CD32 sales have been. I had been under the
impression that CD32 sales were in fact excellent. On the other hand, they
claim that A1200 sales were pretty good.
Any feedback? Any comments? Is this just C= as normal? Or is this actually
bad news?
Hoping for the best…
—— Andrew
Executive News Svc.($)
APf 03/25 1912 Earns-Commodore
Copyright, 1994. The Associated Press. All rights reserved.
NEW YORK (AP) — Commodore International Limited, a pioneer in home
computers, painted a grim picture of its future Friday as it reported another
quarterly loss.
Commodore warned that, without additional financial help, it could be thrown
into a reorganization or liquidation proceedings. It is trying to negotiate a
restructuring with creditors.
Commodore made the announcement late in the day after the close of trading
on the New York Stock Exchange. Its stock was down 12 1/2 cents to $3 per
share.
The company's net worth turned negative during the fiscal year that ended
last June 30 and it has since had two more quarters of losses. On Friday, it
reported an $8.2 million loss, or 25 cents per share, for its second fiscal
quarter, ending Dec. 31.
Sales were $70.1 million. A year earlier, Commodore lost $77.2 million, or
$2.33 per share, on sales of $237.7 million.
The company said financial constraints hampered its ability to supply
products, leading to weakened sales.
Its Amiga CD32 video game machine sold poorly in Europe due to the bad
economy. But the company said sales were stronger for its Amiga 1200 machine.
For the six months ending Dec. 31, Commodore lost $17.9 million or 54 cents
per share, compared to a loss of $96.0 million, or $2.90 per share, a year
earlier. Sales for the six months were $152.7 million compared with $396.3
million in the year-ago period.
Commodore began as a typewriter repair company in the Bronx borough of New
York City 40 years ago. Its extension to the adding machine business paved the
way for it to get make calculators and then personal computers by the
mid-1970s.
Commodore competed with Radio Shack for the first computers sold to homes
and co-founder Jack Tramiel became a highly-regarded figure in the fledgling PC
industry.
But Commodore was pushed aside a few years later by the success of
International Business Machines Corp. and Apple Computer Inc. Although
Commodore was quick to adopt some of the popular graphical interfaces for its
Amiga line, far fewer software developers created programs for its machines
than for Apple or IBM-compatibles.
Story of my life… <sigh!>
So what does this do to the CD32 release in the states?
Also, I've heard rumors of an A5000 prototype already designed? True or
hog-wash?
Chris,
Download the Haynie/Jessup conference transcript (in this forum, I think).
I believe this is the latest news we have about the new Amiga hardware.
Stephen Bailey
Sawyer & Bailey Film & Video CIS # 72773,2451
Chris,
Since the US CD32s is already at the distributors, my guess is that this
announcement will have no effect. It was obvious to the real investor
that Commodore was going to have another bad quarter when their report was
so late.
If I was trying to avoid bankrupcy what I would do is try to scare my
creditors into thinking they had better re-negotiate the loans. Chances
of them getting anywhere near their money back is slim to none if
Commodore was forced to liquidate. There just isn't enough assets to
cover all of the money they owe. Remember Commodore did not go into
bankrupcy proceedings. The real question is 'why?' Bankrupcy laws are
designed to protect the business and the investors of the business. The
fact is that Medhi Ali and Irving Gould want to maintain control of the
company–the last thing they'll want to do is go into Chapter 11.
CD32 here in the US is poised to succeed >IF< Commodore can get
distribution and >IF< Commodore can get titles that they need. It is a
good machine at the right time. Nobody owns the CD-based entertaimnet
system here in the US. I don't think Sega Genesis counts either.
If Commodore could get some monitors and some A1200 produced they could
have an excellent quarter. There are large back orders of both at the
distributors.
So lets not write 'em off yet ok?
(grin)
-mark=
Otto Pilot Engaged..
Mark,
A financial advisor called me last week to talk about several things, and
during our conversation, she looked up Commodore to see what her (very
large) company was saying about their stock at the moment. She said that
their analysts thought the company looked very good – a bargain at the
moment with potential for very strong growth in the next few months. She
was advising me to BUY some. This was a complete turnaround from early
last summer, when they advised people not to touch it.
—Betty
The buy recommendation for Commodore surprises me somewhat since the financial
picture has not improved in a long time and the stock's been flat for a year at
least.
What I find staggering about the news report is the sales level of $70M for
their traditionally strongest quarter. At that rate of sales, their sales are
headed for ANOTHER 50% decline for fiscal 94. That will mean they've gone from
a billion or so to 1/4 of a billion in just a few years. Scary.
However, turnaround is obviously not impossible. I was just speaking to an
executive from Unisys (remember them?). Their stock's recoved EXCELLENTLY in
the past few years and probably made a lot of people wealthy. A couple of
significant things about their turnaround:
1) I think they could have been classified a few years ago as an
unfocused supplier of uncompetitive hardware. Now they're a
solutions and consulting provider for large data processing
customers like banks that still makes hardware (from PC's to
mainframes). A subtle but significant shift. They seem more
customer focused today.
2) They're now ISO-9000 compliant and they've become quality
zealots.
Commodore still suffers from quality problems and they're still unfocused. In
one sense, the death of desktop Amigas will be good for them – it will focus
them on interactive consumer technology. On the quality front, they just don't
get it yet. They're obviously not unique in this of course, but they will have
to get their act together to succeed in the long run. The competition will be
relentless.
Unisys turned around with several _huge_ orders from the government. That
infusion of cash along with very decent terms allowed them to get back on their
feet. It was sort of a mini-bailout. Since then, they have done okay. But
they are now system integrators and sellers of PC's. They do very little
invovation. They are, in effect, a shadow of their former selves.
I think, unfortunatly, that CBM is on it's final decline. There are only three
things in their future.
1) Total liquidation. Someone may buy AAA, someone else may buy rights to some
of the more likely consumer products like CD32.
2) Or, A total refocusing on CD32. It's cheap, easy to mass produce and does
not compete in markets where expesive add ons are the standard.
3) Or, a lingering death over the next 2 quarters.
Either way I don't see them staying in home computers. Of course they could
get a large infusion of cash from someone, but I think the creditors will view
that as sending good money after bad.
CD32 by itself, could turn into a real winner, it doesn't require 8M of RAM,
hard drives, or other things which jack prices up. Its got a good software
library. And being low cost, can be produced in volume. This will let C=
track prices closely to make maximum profit.
CD32 lends itself to cheaper advertising. Everyone understands games! It's
easy to get the point across.
This brings up another whole series of questions…
Assuming the worst. That C= fails, or drops out of home computers:
1) Would a 3rd party be able to step in and continue Amiga? Or would they face
the same issues of money, distribution, advertising, and R&D?
2) What will current OEMS like NuTek do? Buy as many A4000's as they can to
resell as toaster systems? Develop their own machine for their vertical
market? Move to another platform like PC or Mac?
I wonder what will hit the fan on Monday when the markets open.
The stock could blithly continue on as if nothing happened or it could fall
through the floor. I wonder if that could further strangle their cash flow?
Oh well,
—– Andrew
Paul,
it doesn't suprise me. There are a few considerations involved in any
buy decision and two of the main factors that would generate a buy
decision from myself are present. First, is there an expected upturn in
sales expected? With respect to C=, the answer has to be yes as the
English market is currently out of recession and growing nicely while the
other markets in Europe are expected to soon start growing again. This is
not just my opinion, but also that of others that actually do this for a
living. Secondly, if the European market is out of recession, can we
expect to see C= to return to profitability? The answer again is yes, so
P/E ratios should improve immensely. Given these two factors, C= will be
undervalued in the near future and thus the buy recommendation by stock
brokerages.
The caveat here, of course, is whether the other European markets do
come out of their current recessions. If not, C= is entirely dependent on
the behavior of the English market and all bets are off. It isn't large
enough to provide the sales and profits to support the company in the
future.
I don't buy the "European recession" bit at all, since the major vendors
(Apple, Compaq, IBM) experienced HUGE gains in '93 *in Europe*.
While industries like cars are in big trouble in Europe, the computer industry
is booming. I think C='s blaming of the European economy is a crock.
But C='s position in Europe is different than that of Compaq, etc. One,
they have less marketing clout, obviously. Two, they're much more
home-computer oriented, which is a far more elastic market. Indeed, most
PCs over there probably are sold to businesses, which might tend to buy
more in a recessionary period. Not that any of this is good as far as C=
is concerned, but it may make sense.
Ron,
PMFJI but you are correct in your assumptions about the UK market. Most
PC's sold over here are for the business environment, although the buying
public are becomming more PC orientated as time goes by. If people do buy
a PC for home, then it's usually for 'work', not games.
Over here, the games market is dominated by Sega, closely followed by
Nintendo and finally C=. This is PURELY from a marketing point of view,
to high street public.
Inside the industry, it's a different story altogether, Sega still seem to
be top because of their marketing muscle and high street placement
(they're in almost every high street electrical retailer, and even some
news-agents now!).
Market statistics tell us that for CD based games, CD32 not only has 50
games released over here, but is the market leading platform for CD games
in terms of sales with 38.6 percent of the market. PC based CD-ROM games
account for a respectable 31.3%, followed by Sega MegaDrive (Genesis)
27.6%.
C= are viewed over here by outsiders as primarily a games based company
with their CD32, Amiga 600 and the 1200.
According to the trade press, CBM are very pleased with the sales of both
the A1200 and CD32.
Goes to show that the perspective can be quite different from over
here…
Kevin 68030/40 A1200…
Flying AutoPilot from Surrey in the UK
One more thing… (another stat I read) – you're aware that Japan is in
recession too, right? Well Apple did nearly ONE BILLION DOLLARS in sales just
in Japan in '93. Pretty darned amazing.
Paul,
last year we sold over $48 Billion in manufactured goods to Japan,
which somehow gets lost in the hype about how closed the Japanese market
is. Toss in services and license fees, which are only now being accounted
for by the Commerce Department statistics, and you begin to see how much
hype it really is.
I came to an interesting conclusion when I examined one statistic. Did
you know that the Japanese buy almost as much, per capita, from the US as
the US does from Japan? The difference is 13%. Even if there were no
difference between the two, we'd still have a manufacturing trade deficit.
In order to wipe out the trade deficit in manufactured goods, each
Japanese family would have to buy more than twice as many US manufactured
goods as we do of theirs. The problem is simply one of demographics. We
are twice as large as they are in terms of population.
I just did a huge paper on competitiveness, if you can't tell <g>.
Good stuff, Brian. Are you in college? If so, what are you taking? What are
your plans?
One comment: While the trade deficit with Japan is not really any threat to the
US, many of Japan's trade policies are wrong. I'm not talking about MITI
(which the Clinton administration seems to think is a good thing when in a
reality it is a HUGE Japanese bureaucracy), I'm talking about things like rice.
The US is hypocritical of course also, not necessarily that much with Japan,
but in protecting sugar and textile production for example. We massively
protect sugar production for example, despite that the US isn't a very good
place to grow it, and Phillipines is which we hurt by our protectionism yet try
to make it up with big foreign aid grants (a double-absurdity).
Paul,
yes, I'm back in college, taking economics and statistics. Ultimate
goal to be an econometrician.
I ran across and interesting study out of the Harvard Research Group
which studied MITI and the other bureaucracies in Japan. They examined
their patterns of subsidization and regulation and found something
curious. The industries that they helped and regulated most are the worst
performers in the economy. Steel, agriculture, telecomms, etc. The best
performers were those industries that they helped least, or who told them
to go fly a kite, which Honda did when they were forbidden to enter the
car market. And Clinton would like to do the same here?
Agreed on the subject of rice and similiar protections here. The
consumer takes it in the shorts due to higher prices and the foreign
nations get screwed in the bargain.
Commodore's problems really look a lot like what happened to domestic
automakers, which also suffered from poor management. Of course, C='s
product wasn't so poor, comparatively, but its marketing was far worse. So
I agree that there's a chance the firm can pull it out.
OTOH, it looks like that hoped-for deal with Hewlett-Packard to sell AGA
chipsets for interactive TV set converters is going nowhere (H-P cut a
deal with some other outfit that would seem to ace out Commodore).
Ron,
PMFJI, but I'm not sure that HP has given up on the AGA chipset. The way
I read it, HP was looking at a couple platforms for TV top boxes. HP was
looking to license AGA for up to 100,000. I also read that they were
looking at another technology. This new industry is in the test market
phase. Commodore needs to make a good showing in any test that uses their
technology.
Randy
I've heard that the Canada division may take over if CBM fails. Any comments?
Jay Goodwin
>> I've heard that the Canada division may take over if CBM
>> fails. Any comments?
The liquidation of Commodore Intl. would involve the sale of all assests
including design patents etc. How can Commodore Canada afford to buy these
assests? Who will loan them the money? They can't possiblely be sitting on
that kind of cash now.
Even if the liquation causes these items to be sold at fire sale prices, I
don't see them having the money to actually manufacter these things. This
would involve large manufacturing startup costs. And money to buy parts in
advance. Credit will be harder to find than ever.
Where will they sell Amigas and CD32? All day long I hear how well they are
doing in UK, but the figures don't bear it out. The claimed CD32 units shiped
doesn't match total sales in dollars (US) given by C=. Even their own stock
report admitted CD32 sales were "poor", although A1200 sales were "stronger".
I think people see how well it sells in their local shop and extrapolate that
much further than the facts should allow. People, each sharing the good news,
feed on the others info, and the numbers seem better than they are.
If they traded today, it was not on the regular market.
Oh well. Here's hoping for the best…
—— Andrew
Jay,
The company that is bankrupt is Commodore International…the whole
ball of wax (so to speak). If Commodore Int'l goes bye-bye…Commodore Canada
goes with it.
CBM is the US marketing arm of Commodore Int'l, just as Commodore
Canada is the Canadian marketing arm of Commodore Int'l.
Don
Trading in C= stock was suspended on a recent day and the apparent reason
was that there was heavy trading with most of it going in the "sell"
direction. Wouldn't be surprised to discover that Gould et. al. are
dumping. Even so, as you say, this could be an incredibly good time to buy
stock.
Well, the stock is rock bottom right now. It was down to 37.5 cents as I
entered this forum.
37.5 cents: well, that was the last bid price. Trading volume was zero and it
appears trading was suspended again.
Michael
Correct. It looks like trading has halted again. Also, it looks like the
entire market is on a rollercoaster. It'll be a rough ride for what's left of
Commodore.
Trading never started again on the primary exchange (NYSE). Apparently C=
has traded in very low volumes on some backwater exchanges (my broker
didn't even recognize the abreviations). Apparently, some trades have
been as low as .25.
— Dale L. Larson, Intangible Assets Manufacturing
— INTERNET:dale@iam.com
Ron,
It *could* also be an incredibly stupid time to buy.
After all….the company has a negative net worth.
Don
Don,
true, but there is a growing market in buying stock in bankrupt
companies even when it looks like a foolish purchase. Enought times and
you can hit a stock that rockets after coming back out of bankruptcy. I
don't think this would be one of those times, but hey, I'm no expert in
this area. I only read about it.
"If I was trying to avoid bankrupcy what I would do is try to scare my
creditors into thinking they had better re-negotiate the loans. Chances of
them getting anywhere near their money back is slim to none if Commodore was
forced to liquidate. There just isn't enough assets to cover all of the money
they owe. Remember Commodore did not go into bankrupcy proceedings. The real
question is 'why?' Bankrupcy laws are designed to protect the business and the
investors of the business."
Mark:
You've got the wrong idea about bankruptcy, particularly Chapter 11.
Bankruptcy laws protect the creditors, with the secured creditors getting the
highest degree of protection. Investors will almost always get the short end of
the stick in a bankruptcy because they aren't creditors.
These days it is frequently the creditors who don't want to company to resort
to bankruptcy, especially a Chapter 11. Absent fraud or gross mismanagement, a
Chapter 11 petitioner remains as "debtor in possession". Most often, it will be
the unsecured creditors who really get the shaft. Banks and other secured
creditors are more and more arranging what are called "packaged bankruptcies",
a settlement being reached before the bankruptcy petition is filed.
At this point in time, Commodore could enter a Chapter 11 or stay out of it
and probably acheive the same result: a compromise of its secured debt.
The real issue is whether or not Commodore can gain additional working
capital and market share. I'd be inclined to say yes to the former and no to
the latter.
Jerry
With C='s avoidance of selling, and a further avoidance of Chapter 11, it
makes those of us (who are paranoid anyway) wonder if there isn't some
massive cover-up high in the organization that they don't want getting
out. (Like misappropriate of funds, embezelment, or other nasty things
that would surface via these proceedings.)
Chris – Fast and Low on my '020!
…Is it significant that my spell checker doesn't know "Intel"?
"if there isn't some massive cover-up high in the organization that they don't
want getting out"
Unlikely. As a publicly held company, Commodore's books must be certified
annually. The opinion letters to date from the CPA's seem to accurately reflect
the dangers facing Commodore.
Gould is a very tough operator. He's been around for a long, long time and
has been quite successful. There's no reason to file a Chapter 11 petition as
long as the banks and other secured creditors can be kept at bay.
These people know the score real well: if Commodore files a Chapter 11, the
secured creditors lose a lot of leverage and the opportunity for a larger
recovery.
The more pressing question for Gould and company is what to do next. I would
imagine that searching for the next hit product would be their first impulse,
although they haven't succeeded in that regard for many years. Licensing or
selling some technology would be next in line, hoping for a substantial
long-term cash flow. I'm sure that there are also plans well underway to shrink
the company substantially and be content as a niche player until the next
mega-hit wanders into their hands.
The reality is that Commodore has basically blown its chances in the computer
market and probably won't survive in anywhere near its former size.
Jerry
Mark,
Creditors have also been known to take X loss now rather than 2X loss
later. From what I understand, the company is now in technical bankruptcy
now…meaning the compan owes more than the company is worth.
So yes, they'd lose in a liquidation, but they stand to lose even more
if they lend more money…because that puts the balance sheet even deeper into
the red.
Re-negotiating the loans may lower their monthly payments, but it won't
do anything about the negative net worth. Either would new loans, in fact…as
I said, that'd make the net worth even more negative…but *could* add the
capital necessary to produce and distribute products.
So the question is whether it's worth a gamble on current products and
based on the report…sales of the 'savior' products doesn't seem to justify
any infusion of new capital.
The only hope I see is a major new stock issue…unfortunately, since
the current price of Commodore Int'l stock is so low…it'd take several 100
million new shares to have any real effect…and I'm not so sure investors are
willing to bet that much on Commodore.
As to Medhi and Irving wanting to hold onto the company…what company?
With a negative net worth…there really is no company.
Don
Don,
that would explain the loans by Irving Gould to C=.
But C= on paper apparently is worth just about zilch now, even liquidated.
So there's nothing to lose by hanging on. The big question is whether
creditors will extend anymore cash to the firm. If it can demonstrate a
backlog of orders (which is the case with the A1200) it may be able to
count on this.
Ron,
That backlog of orders means nothing unless it's large enough that any
cash generated by it would be sufficient to meet base operating expenses and
leave enough left over to fill a second order.
It makes no sense to lend money so they can go even deeper into debt
unless there is some hope the situation can be turned around.
CBU has assets, they are not worth 'zilch,' they just aren't worth as
much as they owe. Just for numbers…let's say on liquidation they could get
$200 million. If their secured debt is (again…just for numbers) $250 million
then their creditors may figure getting 80 cents on the dollar isn't too bad.
Of course, unsecured creditors (such as stock holders) [I believe that's what
stock holders are considered], who may hold another couple of hundred million
in debt…would be SOL.
Of course, it could also be that their assets are worth $200 million
and CBU has only $100 million in secured debt (plus another $200 million in
unsecured debt…so on paper have a negative net worth). If that were the
case…it is possible their creditors may be willing to lend more cash.
Not having ANY idea of what the real story is….I can only GUESS what
will happen. My guess is that they'll fold very shortly.
I hope I'm wrong.
Don
Chris,
There are already n number of CD32s in the U.S. One of the largest
distributors is shipping, (we received 8 this week), and say they have a large
supply.
They are really concerned that the dealers that do carry the CD32 sell
it at retail which makes me think that CA is pushing them to hold the margin
for additional bargaining power with the larger discount chain stores.
-John
They sold 75,000 CD32s in Europe, supposedly, but had been hoping for more
like 300,000. Yeah, sure. All in one quarter? I don't think so. The main
problem C= has is cash flow. It has substantial back orders for A1200s,
for instance, but little cash to buy parts with which to build them. A
distributor helped out recently in North America, allowing the production
lines to punch out some NTSC models, apparently, but things must be really
tight. C= clearly needs a line of credit but is already deep in debt. If
lenders could be convinced the sales are there and that short-term loans
would produce earnings, they might be convinced to take on the risk.
Otherwise…