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  • Xerox: Not Your Father's Copier Company [View article]
    I agree with techwatcher1. Compare XRX's stock price and financials over time to Kodak's and you will see striking similarities. I'd say XRX is now where EK was five or so years before they went belly up.

    Money can be made by playing XRX's stock price ups and downs in the near term (read: day trading), but it's certainly not a 'deep value' company or stock, except for the officers such as Burns who have the feedbag strapped on as they tease investors with their 'turnaround' (as in 'hang on, folks, it's just around the corner') storyline. It's truly amazing how industry analysts and some investors - the wishful-thinking crowd dazzled by the brand - fall for their bald-faced lies.

    Compare XRX's services segment with direct competitors such as INFY, ACN, CTSH and the like and you'll appreciate how far back they're sliding in terms of operating margin, growth, cash flow (other than from their legacy remnant), etc. They will never catch up. Their long-standing culture of 'everybody's an 'A' player' when that's certainly not the case just won't allow it.

    Burns boasts of extraordinary contract renewal percentages, far above those of XRX's services competitors. The only way to achieve that is to underprice the renewal bids, leading to unprofitable long-term contracts that can take five to eight years to unwind. Look for continued bleeding as operating margins continue to drop.

    Altman's Z-score says bankruptcy is their future. They almost got there twice before. Is their time about to come? Is it 'three strikes and you're out' time?
    Jul 28, 2015. 07:44 AM | 1 Like Like |Link to Comment
  • Should Insider Selling At Accenture Worry You? [View article]
    That ACN insiders should continually be in 'sell' mode should come as no surprise. Their executives are compensated in both cash and stock, with an emphasis on the latter.

    The individuals referenced in this 'analysis' are two of ACN's most senior execs. They probably receive stock awards of 30-40,000 or more shares annually. The 'day one' rule in Investing 101 is 'diversify your holdings'. So who would deny these individuals the common-sense action to diversify as most of the rest of us would?

    Check out the likes of Goldman-Sachs and other firms similar to ACN, with ex-partners running the ship (a vessel by the way that lives or dies by its acumen in crafting long-term profitability in the client deals they make). Virtually all compensate heavily in stock, for obvious reasons. The idea is that they're thereby motivated to generate long-term profitability as opposed to short-term 'hit-and-run' sales.

    To question such de minimus insider sales as these given how ACN compensates its execs (clearly laid out in the IPO prospectus and subsequent filings) seems naive at best. Give us substance please, not alarmist speculation.
    Jul 5, 2015. 09:15 AM | 5 Likes Like |Link to Comment
  • Inferior Performance Pays Well At Xerox [View article]
    Jb, thx for the idea of investing around regulatory issues as a strategy. As I think of my portfolio and winners vs losers, regulatory-sensitive holdings such as Cigna, United Healthcare, Accenture (who fixed Obamacare's website and who just landed a $500+m contract to continue) stick out, as do such companies as GE (a laggard) now dropping many of its formerly unregulated (and lucrative) financial businesses due to Dodd-Frank regs.
    Jun 27, 2015. 02:26 PM | Likes Like |Link to Comment
  • Inferior Performance Pays Well At Xerox [View article]

    I agree with your take that most 'investors' are somewhat naive about building and maintaining their portfolios. That's the basis for my view that a stellar brand, as it declines due to mismanagement (or the market moving away from it and their being unable to respond appropriately), will continue to dazzle many, creating demand for the stock and momentary upticks until the next dose of reality hits. Check out the stock price pattern for EK of several years ago against XRX. You will see great similarities.

    Remember when EK bought the pharma company, Sterling Drug, as its Hail Mary based on vague and questionable 'synergies' and then sold it at a loss 6 years later? Suggest you Google these articles: 'How Kodak Lost Its Way' by Mike Dickinson, and Peter Cohan in Forbes 'How Success Killed Eastman Kodak'. The latter notes how after peaking at $80 in February 1999 EK dropped to $0.75 by September 2011, a twelve-year ride into oblivion. I was fortunate enough to have been able to trade in and out along its downward 'ski slope' of up-and-down moguls, finally exiting at just under $5.00 when the 'belly up' writing was clearly on the wall. That's the same (quite) lucrative game I've been playing with XRX. It's not day-trading but close. It likely has several more years to run, unless there's a strong shake-up that works, which may change the game to 'hold'.

    As previously noted, there are very likely a number of ticking time bombs lurking within their multi-year outsourcing portfolio. That's the inevitable result of rewarding people to book contracts rather than to operate them profitably over multiple years. Watch for continued margin erosion, from the 10-12% of ACS pre-merger to the declining (current under 7%) margin of XRX's post-merger ACS component.

    As with EK, XRX's politically-correct culture is immune to profitably operating a 'non-traditional' (to them) business, in this case, a consulting and outsourcing company. Benchmark them against ACN, CTSH, INFY, WIT, etc., the fleet-of-foot in the industry, who run margins double or more that of XRX's ex-ACS services unit.
    Jun 26, 2015. 08:10 AM | 1 Like Like |Link to Comment
  • Inferior Performance Pays Well At Xerox [View article]
    JBgoose, here's how I'm playing XRX and making good money at it (so far). XRX is a stellar brand, like EK was before it went under (as well as GM, etc.). The 'end of life' behavior of such companies having stellar brands follows a pattern geared for profitable 'in and out' trading. Their ups and downs are easily predicted, down on a bit of bad news, followed by a rebound as unwitting investors 'buy the brand' and hope for the best. It's sort of like riding the moguls on the bunny trail at the ski slope.

    Most of these investors don't follow the industry analysts whom I questioned in my post, so their reporting more honestly really wouldn't change the 'mogul' pattern I describe. I just question their motives (or intellect). Nonetheless, I believe Mr. Zhang is spot on with his take on what management is doing to the investor, to wit, milking the company while making poor business decisions. Ms. Burns' Hail Mary in overpaying for ACS cannot succeed in the face of the likes of ACN, CTSH, INFY, etc. without major surgery that XRX's politically-correct culture (starting at the very top) cannot stomach.

    Significant questions continue to be: what sort of embedded future losses lurk within their services portfolio of five- to seven-year contracts? how much did they have to underprice to get the business? what will be their ability to renegotiate mid-contract, especially given their poor track record of getting results for their clients in the first place? when will these chickens come home to roost in a big way?
    Jun 25, 2015. 07:34 AM | Likes Like |Link to Comment
  • Inferior Performance Pays Well At Xerox [View article]
    One mystery about XRX is why the 'blue-chip' industry analysts who follow the company continue to lap up the Kool-Aid that Burns serves up during the quarterly earnings reports. Either they're complete lackeys (looking for M&A work perhaps?) or totally stupid. No matter what, they lack credibility, less after each quarterly review.
    Jun 24, 2015. 11:10 AM | 1 Like Like |Link to Comment
  • Why Xerox Is A Strong Buy In 2015 [View article]
    For some time I have been trading in and out of XRX, taking advantage of their ups and downs a la EK as they floated down and out of business. Remember how EK acquired a pharmaceutical company as their panacea to cure their ills? Burns' 'Hail Mary pass' of XRX buying ACS is not unlike that. Definitely not a good fit of cultures or top management knowhow, rather a grasping at a thin reed.

    XRX is an overweight and unwieldy behemoth trying to 'reinvent' itself in an industry known for only the fleet of foot succeeding, e.g., CTSH, ACN, INFY et al. Compare not only their financial results but also their respective scores to see what their employees think of their leadership.

    Recently XRX's new head of ACS commented that they had won 20 out of their last 20 large multi-year contract bids. That's a sure sign of a 'stay-alive' strategy if there ever was one, underpricing their competitors to boost current period revenues while hoping things will work out over the contract life, an 'improbable voyage' but buying time for the execs to maintain their high salaries.

    XRX's persistent very low Z-scores do concern me (especially given their two prior brushes with bankruptcy) but not enough not to take advantage of their decline via short-term trading. Just don't 'file and forget' XRX in your retirement fund, unless you want to emulate those EK shareholders who refused to look reality in the face.
    Feb 5, 2015. 10:36 AM | Likes Like |Link to Comment
  • Xerox: Solid Balance Sheet And Enormous Owner's Cash Flow [View article]
    How does one reconcile XRX's borderline Altman Z-score rating (i.e., moving very close to the 'red' zone a la EK) with this positive outlook?
    Jan 25, 2015. 07:25 AM | Likes Like |Link to Comment
  • Accenture Meets All Of My Criteria [View article]
    A long term ACN client's view (actual quote): "Six months later nobody asks you what it cost; they ask whether it works." That's how ACN has penetrated most of the Global 200 and remains in harness, even at their high rates.
    Dec 23, 2014. 04:39 PM | 1 Like Like |Link to Comment
  • Xerox: Strong Cash Flow, Large Buybacks, Fair Value [View article]
    'Diesel' is spot on with his three opening assertions: (a) XRX plans to return half of its (dwindling) FCF to investors; (b) growth has slowed (or, more to the point, has halted/declining) "... but making 'transition'..." (to what, we ask?); and (c) its current valuation does not account for growth (because there's none in sight).

    Check out the following stats, listed in this order: gross margin%/operating margin%/free cash flow ('FCF') per revenue dollar:

    - XRX in 1994: 60.8%/27.1%/16 cents FCF per revenue dollar
    - XRX in 2009 (pre-ACS): 84%/15%/13.3 cents FCF per revenue dollar
    - ACS in 2009 (pre-XRX): 17.8%/10.5%/6 cents FCF per revenue dollar
    - XRX in 2012 (ACS 'integrated'): 32.3%/6%/9.3 cents FCF per revenue dollar, all on a downward trend.

    Might there be some Ursula Burns-style dilution here, as in a ‘Hail Mary’ pass (grossly overpaying for ACS) that is failing even as she rakes in her eight-digit salary?

    Now check out these comps, of which companies XRX claims as its 'peers':

    - ACN in 2012: 31.8%/14.2%/13.1 cents FCF per revenue dollar
    - CTSH in 2012: 38%/18.8%/11.4 cents FCF per revenue dollar
    - IBM in 2012: 48%/19.6%/14.8 cents per revenue dollar

    We get the point. XRX is in fact another EK in the making (remember their Sterling Drug 'synergy' fiasco, sort of like ACS and XRX?). Compare their stock price charts over time. Remarkable similarities.

    Playing XRX can be profitable for speculators and day traders (as were EK and GM as they marched toward their graves). It has been for us. Just don't make it a long-term holding in your retirement portfolio.

    XRX looks a lot like EK and GM in their end times: an 'icon' company with a stellar past headed by a clueless CEO with a giant ego, enabled and cheered on by an equally clueless and quiescent BOD.

    What a wonderful way to make a living. Thanks, Ursula!
    Nov 26, 2014. 12:41 PM | 3 Likes Like |Link to Comment
  • Accenture announces management shuffle [View news story]
    Sounds to me like it's a normal retirement of an older and successful executive, not a 'shake-up'.
    Jul 9, 2014. 07:30 AM | Likes Like |Link to Comment
  • Xerox Management Discusses Q4 2013 Results - Earnings Call Transcript [View article]
    Look closely into their 'engine room' (development and delivery capabilities and tortoise-like culture) and 'wheelhouse' (senior management and BoD) and you can appreciate why 'serious earnings growth' is quite distant, if not a total will o' the wisp.
    Jan 27, 2014. 06:58 PM | Likes Like |Link to Comment
  • ModernGraham Valuation Of Xerox Corporation [View article]
    Both fact and myth(s) are at play here. ModernGraham did a nice job of presenting a succinct quantitative analysis. That's the fact portion.

    As for the myths:
    1. The idea that services is salvation for a hardware company is a myth, unless they're proprietary services focused on maintaining their own devices or software, i.e., a 'captive' market. Here are the typical gross margin/operating margin stats for various components of the IT industry: software - 80%/40%; hardware - 60%/30%; proprietary services - 40%/20%; 'other' services - 20%/10%. This last is somewhat higher than where ACS stood just before XRX acquired them; it's now lower and trending downward. IBM got it right - lots of software and good hardware to deliver their high ROE.
    2. XRX's sale of their solid ink business to DDD was at a distressed price, a great buy for DDD. It represents another step in XRX's exit from that market (except for providing certain components). They do not have commanding patents or technologies. Once again, too little too late. From the horse's mouth per a recent CNBC piece: "Kevin Lewis, head of Xerox's 3-D initiatives, said, "I just think the [additive manufacturing] market will be small [for Xerox]." Also, a good deal of XRX's engineering and R&D was placed (by Burns as president) in the hands of HCL Technologies, a head-to-head competitor of ACS. How proactive do you expect they'll be in helping XRX maintain its technology cash cow, which funds competitor ACS?
    3. No board member, including Burns, has ever run a company, or is currently running one, whose ROIC has in recent years exceeded its weighted average cost of capital (OTC:WACC). Such companies are, by definition, short-timers. Just a matter of time, or perhaps a miracle?
    4. As djean states XRX's services business (mostly call centers) is low margin and people intensive. Overstaffing in both their technology and services businesses is the reason XRX's operating margin is suffering and continues to decline annually. Just too many legacy heads and a management lacking backbone to deal with them. ACS moving to India to get cheaper labor only exacerbates XRX's conflicted relationship with HCL. And those who expect that the health care wave will carry them in the future should check out the mess they've made in Montana 'rebuilding' that state's Medicaid computer systems. It's ObamaCare all over, probably worse. And it's not the only one.

    For whatever it's worth, I have done well with Xerox (and other basket cases) over the years. I am currently long, but with a hair trigger finger on it. It's definitely not a good long-term investment for the retirement fund. It must be watched closely, with hand always on the escape hatch lever.
    Jan 8, 2014. 01:10 PM | 1 Like Like |Link to Comment
  • AT&T's Sale Of Connecticut Wireline Assets Makes Sense [View article]
    Dosto, ya gotta give Stephenson some credit for fleecing FTR of $2b cash for an essentially wasted (read: wireline) asset. Good trick given that they and VZ and others are positioning with FCC to get out of the wireline business starting a year from now. Far better $2b cash now than writing it off in a couple of years or, perhaps worse, having to keep it alive indefinitely for political reasons, especially given its CWA and other pension liabilities.

    Short FTR, stay long T.
    Dec 19, 2013. 03:50 PM | Likes Like |Link to Comment
  • Frontier Communications Doubles Down On Landlines [View article]
    Relevant facts not mentioned:
    1. CEO Wilderotter became top dog in 2006, with stock price at $14. She purchased certain land line assets from Verizon in late 2009, with stock price falling to $8. Stock now at $4 and change. Is there perhaps a trend here? Will we soon see a $2 handle on FTR? Is this just one more Wilderotter 'Hail Mary' pass? Read on.
    2. FTR is badly in need of new cash flow to keep its payout engine going, the only strategy management can come up with. ATT-CT may provide that short-term, but at the expense of being a rapidly declining market as technology changes the game and customers jump ship to cellular and IP. And does this management stand a chance against the CWA and its pension fund shortfall?
    3. FTR is one of the most heavily-shorted stocks today, with 20% of stock outstanding currently in short interest. Eh?
    4. FTR's Altman Z-Score is very low and in 'red zone' territory, indicating a probability of bankruptcy in the next two years of 'somewhat less than 49%'. Huh?
    5. The land line providers (ATT, Verizon, etc.) have petitioned the FCC to begin SHUTTING DOWN or otherwise abandoning (or better yet selling for a premium price to someone less smart) their land line operations as soon as a year from now, as cellular and IP technologies take over. At $2b, ATT took FTR to the cleaners, just as Verizon did in 2009.
    6. FTR, desperate to generate new cash flow, will cut capex to the bone and raise prices, spurring further deterioration of land line service levels and accelerating customer cancellations.

    Anybody who denies these facts ("but, you know, we need POTS land lines for fax and 911 service") has their head in the sand and/or does not understand technological disruption and how fast it is happening in telecom.

    An interesting stock for day traders, but not for 'buy and hold' types.
    Dec 19, 2013. 07:18 AM | 3 Likes Like |Link to Comment