Loren Paz

Syntax-Brillian: A Classic Bottom

As far as the new model China model goes there is no doubt that it is much less profitable then directly selling like previously. However, the 120 day terms and late payments in China resulted in cash flow problems. In sort, under the new model, the income statements would be much uglier but the statement of cash flows should be much improved. It might be possible for the company to actually generate postive cash flows from operations under this new model which I don't think was possible under the old China model.

Currently however, I still do not see where the cash freed up from the new model is going. Li himself stated that in the guidance conference call update that the company will not be producing television at maximum capacity due to supply constraints in the panels until after mid-2008.

I do not know how the author arrived at the estimates for revenue for calendar 2008 but it appeared to be a tad too high. Generously assuming that Vivitar digital camera revenue would be $100 million and the company can maintain somewhere around a $550 ASP (Average Scree Price) in calendar 2008, the company would still have to sell over 1.3 million units of LCD TVs to achieve $850 million in revenue. This 1.3 million units does not include those made by their licensed distrubutor in China.

For this quarter ending december, which is the busiest shopping season for LCD TVs, the company only expects to ship between 250,000 to 275,000 units when not counting those sold by their China distrubutor. With the panel supply constraints stated by the company, I do not see how units sold can be improved so darmatically to achieve $850 million in revenue.