Are the Changes at Syntax-Brillian Material?

There have been a number of changes at Syntax-Brillian (BRLC) in the past week, but the real question remains: will it be enough to turn around the flailing LCD television manufacturer?

First, CFO Jack Hodgson resigned at the end of March. This shouldn’t surprise anyone, as his resume was filled with numerous short stints at the position and thus indicated he was meant to be a transitional CFO at best. This process could have been accelerated by the fact that his options grant (110,000 shares) was likely far underwater, as the stock has fallen approximately 70% since October 1st, 2007 when Hodgson assumed the CFO position.

Next, CEO James Li took a voluntary salary cut to $1, putting him in the same league as Apple’s (AAPL) Steve Jobs and Google’s (GOOG) Brin and Page. This is perhaps the first and last parallels that can be drawn between that set of companies, and while Li’s salary amounts to just $240,000/year and thus isn’t going to free up the significant cash flow Syntax-Brillian desperately needs, I like the symbolism behind the move… especially given that most CEOs believe in a disconnect between their company’s performance and their own pay.

The third announcement was a deal with China-based Compal by which Compal will begin producing a large order (300,000 units) of Olevia-branded LCD televisions. It seems that Syntax-Brillian is looking to navigate around its highly constrained working capital by becoming an asset-light manufacturer that will outsource its main production, utilize its patents to add value, and pass along the brand name. While this sounds like a favorable business model, my main concern is that the Olevia name is not yet strong enough to boost Syntax-Brillian into the top echelon of television manufacturers. Still, this approach could relieve the company’s main problem – capital constraints – and we’ve never really gotten the chance to see how well Syntax-Brillian can execute with sufficient capital.

So to return to the main question: are these changes material enough to make me reconsider my position that BRLC is nothing but speculation? No. Syntax-Brillian is a “show-me” stock in what I still regard as a “show-me” market. Plus, the financials aren’t straight and too far out-of-date, and how can you try to get an idea of where a company (especially one in such a state of flux) is when the last financials you have are more than six months old? Eventually (hopefully?) updated financials will be released, and that is going to be a crucial moment for this company. Taking a position in front of that is just a gamble. And, try as I might, I can’t get any indication from the company that the earnings release is in sight.

Disclosure: none

Comments

[Ben Around:]

sad to say I must agree that the burden of old data has weighed the stock down. Even sadder is the fact that I gambled and am now stuck in a waiting pattern.

They must put out the financials . bad news is baked in so get it done.

2008 Apr 08 10:08 AM

[awer:]

Flat screen TV is a star, all the article in SA is a comment, or the front door dog to make noise. no data backup.

2008 Apr 08 02:40 PM

[jandccerny:]

Maybe they don't need to be top echelon in sales to be successful for now. I think if they just maximize cost of existing intinsic sales they become solvent. then they can plan for stable and contollable growth. IMO I think Mr. Li knows that and I beleive He's executing.

2008 Apr 08 02:43 PM

[obkozranch@...:]

At 1.20/share the reward to risk is too great. Long at 2.20 and adding before I loose the 100% run to 2.40

Capital and liquidity is not an issue. Brand recognition is. In time the Olevia Brand will prove to be quality, and then there's Vivitar.

At any rate I believe 5$/share will incure a dilution for cash, and that's the way to reduce this debt. Way too low a float to be concerned about short term constraints. ESPECIALLY since the lenders are in full control of where the money is spent. NO frivolous spending here. Besides high beta is in, and technically speaking the chart is poised for a breakout.

2008 Apr 08 06:54 PM

[James Cullen:]

Agree on the point about the lenders to an extent - as bad as it sounds, Syntax-Brillian's inability to manage its own working capital means it's probably a good thing someone else is in charge.

2008 Apr 08 11:00 PM

[User 175282:]

why would anyone waste their time,analyzing a piece of crap penny stock like BRLC,which is nothing but an out and out pump and dump vehicle for all the crooks and gangsters on wall street?

2008 Apr 08 11:12 PM

[teknikk7:]

Sounds like somebody lost a couple bucks on this stock...

What a foolish post, only someone dumb enough to get taken by crooks and gangsters would post something like that. From the tone of your post it sounds like your emotions are getting the best of you, most likely it's the reason you are loosing money in the markets too.

This stock has plenty of potential, if you own a Olevia television you know what I am talking about. Look for a breakout soon!

2008 Apr 09 05:06 AM

[168275:]

I WOULD ADMIT THERE IS AN ELEMENT OF GAMBLE IN THIS STOCK. BUT AT 1.22 IT HAS MORE POTENTIAL FOR GAIN THAN LOSS. I LIKE THE DEAL WITH COMPAL, I WOULD THINK IT STRENGTHENS THEIR SALES POTENTIAL & RELATIVE POSITION IN CHINA.

2008 Apr 09 02:52 PM

[VanceWade:]

Um, their business model has ALWAYS been "to outsource their main production." It's true that when the former Brillian existed, they were making prototype units in Arizona, but the idea was always to outsource that production.

I agree that they need to put earnings out there. It's inexplicable to me why they haven't yet done so.

2008 Apr 11 09:19 AM

[James Cullen:]

168217,
I have never owned this stock - ergo, no losses to make me "emotional"...

2008 Apr 11 03:18 PM

[Loren Paz:]

James, you got to forgive the bagholders. They will attack anyone with any hint of negativity on BRLC. They seem pretty emotionally attached to the stock to me.

Until, the company releases some more current financial statements and clarification about the situation from their lenders, the stock isn't going anywhere and will probably stay around a buck.

2008 Apr 11 08:55 PM

[RC Martin:]

Loren,
You've identified the root problem. Absent any public commentary by management, investors and shareholders are shooting in the dark. This is a situation easily remedied.
If they cannot produce the actual figures from the DEC qtr it doesn't truly matter as most potential buyers want to know what the CURRENT status is relative to production and retail partners. They announced panel deals with Sharp and LG and followed on with a Compal manufacturing deal. It begs the question, what happened to the panel deals? This team seems content leaving any and all pertinent questions unanswered.

2008 Apr 15 02:31 PM