Syntax Brillian: The Future Looks Bleak

Just after Syntax-Brillian Corp. (BRLC) was severely punished by the Federal Communications Commission for “willful and repeated violations” of the ATSC tuner mandate with a fine of $2,899,575 , more bad news hit with Sony (SNE) saying it will soon be selling a line of televisions specifically for Wal-Mart Stores (WMT), Target (TGT) and other discount retailers.

The new line of Sony televisions will directly compete with Syntax-Brillian’s Olevia brand televisions and other lower-end Tier 1 or Tier 2 television brands such as Vizio and Westinghouse. This would be a severe setback for Syntax-Brillian. Syntax-Brillian has already been selling Olevia LCD TVs in discount retailers such as Target, K-Mart and Sears (SHLD). Its main selling point is its low price compared to name brands such as Sony, Sharp (SCHAY.PK) and Samsung. However with Sony offering a budget line of LCD television, Olevia and other low price LCD television makers would start losing their advantage.

Currently in stores, a Sony 32" Bravia S-Series LCD television (KDL-32S3000) is sold for around $1,300 when a Olevia 32" LCD television (532H) can be found for around $700. With a $600 difference, this gives the Olevia television an advantage in attracting customers with a limited budget or those that do not wish to spend a whole lot on a television. Many customers are buying Olevia televisions for the low cost rather then the brand. However, if Sony is able to sell their new line for say around $800 to $900 it will be troublesome for Syntax-Brillian; if shoppers see that the difference between an Olevia and Sony television, sitting side-by-side in a store, is just $100 or $200 then they will be more likely inclined to purchase a popular and reputable brand name like Sony rather then a relatively new and unfamiliar brand like Olevia. Sony plans to supply retailers with the new line within 60 days.

Some questions should also be raised about Syntax-Brillian’s management team. On February 14, the company forgot to report a $2.7 million income tax expense in its second quarter, which they had to later correct, and they are now being fined $3 million by the FCC because of “willful and repeated violations” of the ATSC tuner mandate. The company should have been more than aware of the requirement initiated March 1, 2007 that all televisions sold must incorporate a digital ATSC to prepare for the upcoming switch from analog to digital transmission in February 2009. Why the company decided to "willfully and repeatedly" break the rules is beyond me.

Meanwhile, Syntax-Brillian’s stock price continues to plummet. It closed down 48 cents or 8 percent on June 12 at $5.46 . Even those who bought the 30 million shares during Syntax-Brillian’s secondary offering, at what was a discount then at $5.75, are in the red. Syntax-Brillian’s stock is now 54% off from its 52 week high of $11.70. The stock certainly doesn’t look like the short squeeze of the year as many were claiming just about a month ago, with the stock now down about 22% from then.

Disclosure: Author has a short position in BRLC

BRLC 1-yr chart

Comments

[Shailesh Kumar:]

So maybe Syntax Brillian will grow less than 300% this year over last year. With a forward PE below 8, this is likely the most undervalued and heavily shorted stock in the markets today. Being short on this kind of issue appears to have great risk with very little reward potential

2007 Jun 13 08:49 AM

[RC Martin:]

Of particular interest is the $134MM of Asian sales which occurred during the Sept-Dec qtr and apparently remain largely uncollected. Has anyone ever received an explanation why sales in Asia of $134MM occurred at the same time a similar amount of "PAYABLES" were being booked? Isn't the cost lower than the sale by at least the level of profit margin?

Did Kolin manufacture and ship those Asian sales on behalf of Brillian or did Brillian book those sales on behalf of Kolin? It so hard to untangle the web of players. Where did the Olevia trademark originate? Wasn't that Kolin's brand when they did the deal with Syntax prior to the Syntax Brillian merger?

So much grey area...........but one thing is clear, expecting a FCC pass because you're a new start up is sophomoric mgmt at best. There is no justifiable excuse for costing shareholders $3MM. This outfit seemingly lacks competent mgmt and has a great future behind them. At least that is how this writer sees it.

2007 Jun 13 01:49 PM

[chiggins:]

this is ridiculous. Sandy Sanmina who posts negative stuff on BRLC on Yahoo chat rooms now comments on "Samuel Sanmina's" article. Does someone smell a big rat here? I think this was written to scare thr longs out to give shorts cheap stock to cover at while disguising the buy back. You have to take a profit sometime. Shorting longer term has not paid off in the last 4 years with a few possible exceptions

here's the link to Yahoo, you be the judge (interesting that I could only find responses to Samina)

2007 Jun 13 02:04 PM

[chiggins:]

I did a Google search on Samuel Sanmina and it appears he only appeared as writer for Alpha a few days ago. He never wrote anything except under another name of sandy Sanmina. This is a scam since the gentlemen named Sandy in Tampa FL also seems to not exist. this is a poster who is trying to make the stock fall more.

2007 Jun 13 02:19 PM

[nash49:]

BRLC is a continuation of a very clear trend in CE manufacturers that choose to BUY market share to gain notice with investment bankers and to a lesser extent, retailers.

Apex Digital - Where are they now? The owner was recently released from house arrest in China. Arrested for not paying almost Half a BILLION Dollars (USA dollars) past debt.

Norcent - Hired some Sony Execs...were going to be the "next Sony". How are they doing now?

SVA - Tried to buy market share, but couldn't even figure out how to gain market share below cost. They have left the USA market.

Konka - Same as above. They are trying to enter again.

Polaroid - Petters Group - Sourcing LCD and Plasma TVs and using the Polaroid name. Worked well for a while...until they realized it is impossible to not lose money when you sell below cost....and don't have vendors that are willing to give you enough credit.....now they are trying to become 'brokers' for factories to sell to USA retailers...without taking on any financial obligation...not a bad idea.

Syntax Brillian - Hired some Sony Execs...are going to be the "next Sony". Sound familiar?

Bottom line is that BRLC, like many before, are trying to spin the fast growing flat panel business with investors so they can make their profit on the stock....before they implode. The fundamentals of the business are such that NO COMPANY can make money in the category....even the component manufacturers, who usually are immune from extreme market factors, are losing money (Philips - LG).

2007 Jun 13 02:43 PM

[Jason Flora:]

Amazing, SA sinks to a new low. We have Samuel posting an article full of half truths (the FCC fine is covered by BRLC's manuf partner Kolin and not material) and innuendo (Price point on the new Sony line)(. And we have his alter ego Sandy commenting on it (Sandy being one of the longest running BRLC bashers on the yahoo message board.) Perhaps SA should not only put a disclosure of whether an author is short, but whether their short position (or the short position of the firms they represent) is actually legal and not naked...just a thought as BRLC continues to linger on the SHO list.

2007 Jun 13 02:52 PM

[chiggins:]

Are you people really angry about the Trash writen in Seeking Alpha? (Not rated) 21 minutes ago Come on it's just a game!


Sentiment : Strong Buy
Rate it:

samuel




Re: Reason is down (Not rated) 38 minutes ago I RETRACT that ARTICLE and reget writing it now!

See, I just had to cover, you understand!
Rate it:

samuel_sanmina

Don't judge our crooked actions until you know what it's like (Not rated) 13-Jun-07 01:51 pm Being short millions of shares on the day we knew the CIBC conference positive news was coming!

We know how to time Blogs, now don't we just?

PS: We covered and went long


Sentiment : Strong Buy
Rate it:

samuel_sanmina




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Sentiment : Strong Buy
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2007 Jun 13 03:26 PM

[Samuel:]

I am glad that so many people are interested in my commentry.

However, first of all I have no idea who this Sandy Sanmina is and no idea who the person quoted as samuel_sanmina posted by CA is either but it is not me. I do not waste my time on frivilous matters such stock message boards.

I fully diclose that I am short or rather the fund I work for is shorting this stock. It appears the market fully agrees with the threat posed by Sony's budget line of LCD Televisions which is one of the reason for the 15% decline today.

We were aware eventually a Tier -1 manfacturer would start producing lower costing televisions to increase their market share when we initiated our short position and if that didn't materialize, a price war in the television market would eventually drastically reduce the price difference between Tier 1 and Tier 2 & 3 televisions. As a result it would greatly hinder business for low end television manufacturers like Syntax. Other Tier -1 manufacturers such as Samsung or Sharp might eventually enter the low end market too. A shake out of lower end brands in the television market is inevitable.

If individuals truely feel compelled that Syntax-Brillian is a great value and believe the $15 price targets set by the analysts/co-managers of the secondary offering, I do not discourage them from buying more. However my advice is to becareful when buying on margin and where you set your stop loses. Heh. I believe many learned a lesson today.

Also, Samuel is my real name but Sanmina is not last name. It is alluding to Sanmina-SCI Corp. (SANM) which I have a slight indirect relation with.

Oh, for those individuals that believe articles such as this one really have any effect on the stock price of BRLC, you are truelly mistaken. If my article could move the stock by 2 pennies that I would be atonished. However, these articles are a good way to present different sides of the arguement.

2007 Jun 13 04:03 PM

[RC Martin:]

For the record I am neither a buyer or seller of Syntax-Brillian. I am an interested observer concerned with the irrational exuberance being flaunted on Yahoo and also the baseless BS being bantered by so called "PROFESSIONAL ANALYSTS" with claims like "Greatest Short Squeeze of all time" and price targets with no foundation in reality. Why would a stock supposedly worth $15+ be trading at $4.60 if not for well orchestrated con games.

If readers are upset I would suggest you sue the financial firms that employ those so called analysts or write them demanding they retract the hype and fluff and terminate the BS.

In closing , I will say I have personally researched this outfit and wouldn't buy shares in the firm with your money, but apparently there are more than a couple PROFESSIONAL outfits that would like you to buy into their BS and take some shares.
Hint, when a stock is trading t $7+ and a secondary is declared complete at $5.75 and you the member of the public had no opportunity to participate its usually a signal that you're about to be fleeced by Wall Street Pros,(read, con men).

The aforementioned is the opinion of this writer and should not be taken as advice to buy or sell securities

2007 Jun 13 05:55 PM

[R. Ennis:]

Dear Seeking Alpha,

I'm beginning to wonder if you have an integrity issue. Is this article well founded? There some wild assumptions here and I would like to point out that the writer of the article could be writing this as some form of manipulation.

There are recent posting on Yahoo that lead me to believe so:
messages.finance.yahoo...;bn=24145&tid=...

Please check facts and integrity of poster before allowing such articles. Some people have real money the stand to loose.

Concerned reader who doubts the integrity of this sight!!!!

2007 Jun 13 07:22 PM

[chiggins:]

SEC eliminates grandfathering Naked short sales clause

WASHINGTON -(Dow Jones)- The Securities and Exchange Commission voted Wednesday to abolish longstanding rules that restrict short sales in declining markets and approved another change to tighten rules intended to curb manipulative short sales, including so-called "naked" short sales.

The first change ends decades-long restrictions by the SEC and U.S. markets on selling short as prices are falling. An experiment in lifting the rules for select stocks showed there was little justification for retaining restrictions such as the New York Stock Exchange's "tick" test, SEC Chairman Christopher Cox said.

Elimination of SEC's short-sale price restrictions, and rules barring markets from using a "tick" or "bid" test to control short sales will take effect immediately after the rule change is published in the Federal Register, SEC staffers said.

A second change approved by the SEC modifies Regulation SHO, which the agency adopted in 2004 to curb abusive short sales. The change eliminates a controversial exception to the 2004 rule that shielded existing short positions from requirements to deliver hard-to-borrow shares within 13 days of settlement. Once the change takes effect, short positions previously protected by the grandfather clause must be closed out within 35 days.

Short selling involves sales of borrowed securities, producing profits when prices decline. The practice is legal, but the SEC's Regulation SHO sought to prevent "naked" short sales, in which short sellers don't borrow securities they sell.

SEC officials said delivery failures have declined about 35% overall since Regulation SHO took effect and have fallen about 53% for hard-to-borrow stocks defined as "threshold" securities.

Longstanding, persistent delivery failures seem to be due to the grandfather protections and a shield for short positions held by option market makers, Cox said. He said delivery failures hurt investors and companies, and may be a sign of naked short selling.

"It continues to be a problem, particularly in the microcap space," Cox told reporters after the SEC meeting.

More public data on delivery failures is in the works, as the SEC plans to make Depository Trust Co. data available on the SEC Web site shortly. SEC officials plan to remove certain confidential information from the data feed already supplied by the DTC before posting it online.

The SEC abandoned earlier plans to narrow the exception for option market makers and voted Wednesday to seek comment on eliminating the exception altogether, or adopting alternative approaches.

In addition, the SEC deferred action on a fourth rule that would have tightened short-sales in connection with public offerings, but Cox said it plans to take up the matter shortly, perhaps later this month.

- By Judith Burns, Dow Jones Newswires, 202-862-6692; Judith.Burns@ dowjones.com

(END) Dow Jones Newswires
06-13-071236ET
Copyright (c) 2007 Dow Jones & Company, Inc.

2007 Jun 14 12:02 AM

[chiggins:]

Live In Play


14-Jun-07
10:54 BRLC Syntax-Brillian: Research reveals a huge demand backlog for Olevia TVs and ample production capacity - Brean Murray (5.14 +0.58) -Update-

Brean Murray notes that over the past two days, concerns over Circuit City (CC) phasing out Olevia TVs and Sony's (SNE) plan of selling TVs into Wal-Mart (WMT) have pressured BRLC. However, the firm's research confirmed that CC is not only continuing but also expanding orders for Olevia TVs for the remainder of 2007. Further, though they are unsure of SNE's pricing strategy for its line of TVs for WMT, their latest market comparisons reveal that SNE currently prices its TVs at nearly a 100% premium to similarly equipped Olevia TVs.

2007 Jun 14 11:09 AM

[chiggins:]

BEST BUY now sells OLEVIA on website

www.bestbuybusiness.co...;showAddButton=true&am...

2007 Jun 14 01:07 PM