Monday, February 21, 2011

Transocean (NYSE: RIG): Expect to See Price Drop Around Earnings Release on February 23, 2011

Many of you that have traded stock and options on Transocean, since the Gulf of Mexico oil spill/rig blowout disaster, have done well... that is, if you managed to stay on the right side of the trade while the stock almost doubled from a low of $44 in June 2010.

However, with the stock trading at close to $84, the big question is where we go from here. Now that the options play before FEB expiration is over; and billionaire investor Paulson & Company have taken position in the last quarter of 2010, we should get ready to see some reality to set-in the PPS of RIG.

All those factor that could effect the PPS are aligned against Transocean stock...
  • Lower earnings this quarter compared to the same quarter last year (98 cent expected vs the $2,29).
  • We are seeing declining revenues and earnings every quarter for the last six quarters since the quarter ending September 2009. Seems like “bloom is off the this rose”.
  • We are seeing declining day rates with increasing number of rigs going on standby rates after the accident in the Gulf of Mexico... and most recently, the political turmoil in the Middle East.
  • Recently, the company announced over a billion dollar charge resulting from the impairment of the Standard Jackup fleet.
  • There is still the specter of criminal and civil liabilities from the GOM accident.
  • Cost of doing business has increased dramatically for the off-shore drillers.
  • Legal expenses are escalating after the GOM accident.
  • Oil at around $85 and staying flat. However, political turmoil in the Middle East may increase the short term price of oil but that does not effect the rig engagement prospects in the short term.
  • More and more majors are demanding lower day rates in the politically troubled Middle East and some majors are even forcing “ Force Majeure” clause in their contracts.
  • Increasing number of deep water rigs are being built on spec and coming on-line in search of contracts. 
  • Dividend payment at Transocean is still in limbo and the decision is currently tied-up in Swedish courts. 

    Offshore Drilling May Not Be as Strong as Expected... and that includes RIG
Here's a recent Wall Street article on the subject...

All the above scenarios point to flat to lower PPS for Transocean in the days ahead. 

Despite higher oil futures due in part to intensifying protests in the Middle East and a federal judge ordering the Obama Administration to make a decision on five offshore drilling permit requests in the next 30 days, the Offshore Drilling Stocks Index is Flat.

While the Obama Administration has lifted a moratorium on deepwater offshore drilling in the Gulf of Mexico that was put in place following the April 2010 accident, it has yet to approve permits for new drilling operations. Ensco (ESV) is trying to get five permits, some submitted as far back as April 2010, approved and Judge Martin Feldman on Thursday ordered the Interior Department to approve those applications within 30 days, the Wall Street Journal has reported.

The Obama Administration says there is no specific timeframe mandated by federal law to render decisions on offshore drilling projects, according to the Journal.

Now, let's talk about Paulson & Company taking a stake in Transocean...

Arguably the most successful investor in the world, Paulson & Co. reported its end-of-year holdings to the SEC recently. I'm little surprised at his stake in Transocean during the fourth quarter of 2010. Paulson is a bit late to the party with this new position... because, there were much better opportunities to buy the shares of Transocean in the third quarter without taking appreciably more risk; when the Gulf oil spill was front-page news every day. Indeed, another value investor, Bill Miller, made a very profitable case for Transocean last June... when the stock was still trading in the mid 40's.

The most recent run-up in Transocean PPS to $83.40 can be attributed, in my opinion, to the FEB options expiration and Paulson & Co taking stake in the RIG stock during the fourth quarter of 2010.

With these two events behind us, the reality of Transocean business must play out its due course with flat to lower stock prices in the short term. There are some very profitable options strategies that you can use to take advantage of this flat to somewhat declining stock price in the short term.

Anant Goel

Saturday, February 12, 2011

MicroVision: Schedules Conference Call to Discuss 2011 Strategy and Preliminary 2010 Results

Press Release
Source: MicroVision, Inc.
On Friday February 11, 2011, 8:00 am EST

REDMOND, Wash.--(BUSINESS WIRE)-- MicroVision, Inc. (NASDAQ:MVIS - News), a leader in innovative ultra-miniature projection display technology, today announced it will host a conference call to discuss its 2011 business strategy and preliminary financial and operating results for the fourth quarter and full year of 2010 on Tuesday, February 15, 2011 at 8:30 a.m. ET / 5:30 a.m. PT.
Here's the link...

It comes as a surprise that 4th Qtr earnings conference call is being held on February 15th at 5:30am PST. It is much earlier than the usual first week of March and always after the market close at 4:30pm EST. Some folks would speculate; and take this as a sign of something good... and for a change, they may just be right.

It is quite apparent that the 5:30am PST conference call [at 8:30am EST] is being intentionally organized to conclude before the US markets open at 9:30am EST... while it is still early pm in the Kingdom of Japan; ̶the home of Pioneer Corporation. In my opinion, the decision to hold the CC this early in the morning; is not only to accommodate what Pioneer Corp may have to say... but also to influence the MVIS stock activity in the US financial markets.

Make sure to pull-up your shorts... because there is news on the tab that could impact your financial health in the “short run”.

With the conference call timing issue out of the way, let's now focus on the subject of the CC...

“... to discuss 2011 strategy” as it says in the headline to the Press Release.

I expect most of the CC time being spent here on the subject of 2011 strategy...

I expect Microvision and Pioneer Corp [to be present in some way or form] and lay the foundation for a total makeover and a fresh start for Microvision... with its CEO “in tow” to pitch the financial orgy of last four years as just a bad dream.

In the name of  “... 2011 strategy”, I expect to hear about major changes announced [which could be an on-going process] in all business aspects of Microvision... with Pioneer's finger prints, influence, and involvement being quite visible.

Here's business aspects that are expected to be discussed and significantly influenced , hopefully for the better, in my opinion...

* More visibility to Pioneer relationship and agreement
* New organizational structure
* Staffing levels and re-assignments
* Cost cutting [and cost sharing] measures
* Current and new funding source(s) and structure
* Diode Green Laser program and the role of SHG green laser
* Inventory write-downs and losses
* Significant drop in cost of "bill of materials" for SHOWwx line 
* Ramp-down SHOWwx production to parallel inventories 
* HEMP OEM coming out party
* New products in the pipe line with garbled time-lines as usual

We should see more confidence in CEO Tokman's voice after years of babbling and garbled communications. It takes gumption [and some charisma] to let go the “VP of Sales, Marketing and Business Development”... and still manage to survive as the CEO of the company.

Microvision will survive; and will do just fine under the virtual “halo” of big brother Pioneer Corporation of Japan.

Anant Goel

Sunday, February 6, 2011

MicroVision: Major Cost Cutting Measures or Death Spiral?

We have known for some time that major cost cutting measures were underway at MicroVision.

Now, it looks like the reality of picop projector market [limitations at this stage] has finally set-in at MicroVision... and the pace of cost cutting may have picked-up momentum; to a point where “fat cutting” may be “slicing the bone” and cause structural damage to the integrity of the company.

The most recent [and visible] casualties of this cost cutting measure, assuming that's what they are...

First, Matt Nichols... Director of Communications and former VP of Marketing at MicroVision (November 2010)
Then, Ben Averch... Global Product Manager (January 2011)
Now, Michael Fritts... Vice President, Sales, Marketing and Business Development (February 2011)

There are no public announcements of Mr. Fritts leaving the company. So far, the only way we are able to conclude that he is no longer with the company; is from his profile being taken down from the “Management Team” at the company web site, as well as, his name that no longer appears as part of the management team in the Media Kit.

Here's some links...

The current management team looks like...

Alexander Tokman: CEO and president
Jeff T. Wilson: CFO
Joe O’Sullivan: Vice president, global operations
Sid Madhavan: Vice president of research and product development
Thomas M. Walker: Vice president general counsel & secretary

No matter how you spin-it, the fact is: it's not an error or an act of omission by any length of imagination that Mr. Fritts' name just got dropped from the “Management Team”. There is no doubt that Mr. Fritts has left the building. However, the big question now is: why there was no formal announcement of his resignation [or termination], and most importantly, why on earth there is no replacement announced by the CEO or BODs at MicroVision?

Regardless of what a company does for business, sooner or later, every single company out there in the real world recognizes the need and value of “Sales, Marketing and Business Development”... and as such, there always is, as a matter of fact, an executive level position for VP Sales, Marketing and Business Development” included in the corporate hierarchy.

This entire episode of missing “VP Sales, Marketing and Business Development” is “bizarre”... to say the least.

What makes MicroVision business model so different that they can get-by without a VP of Sales, Marketing and Business Development?

More importantly, why there is no public announcement of any or all news associated with this bizarre episode of the missing VP of Sales, Marketing and Business Development... not only the missing executive but also the missing position [title] as part of the executive management team?

Here's the question for the CEO and BODs of MicroVision...

“After four years of financial orgy that produced insignificant amount of sales [of anything] but involved dozens of highly paid managers [and support staff] in the PR, IR, Sales, Marketing, Business Development, Administration, Global Product Management, etc... are you now “cutting fat” so deep that it may be “slicing the bone” and cause structural damage to the integrity of the company.”

Investors of MicroVision want to know?

Anant Goel