Syntax-Brillian's (BRLC) share price decline has in part been accredited to a false rumor that was initiated none the less than by one of Syntax-Brillian’s competitors. The false rumor that Circuit City (NYSE:CC) would no longer sell Olevia was firmly denied by Syntax-Brillian’s CEO Vince Stilleto.
Not only were the rumors false, but now we are learning that Circuit City is actually increasing their Olevia SKUs. And lost in the noise was the same analyst stating the possibility that Olevia would soon be sold at Best Buy (NYSE:BBY) stores. Is this true? Best Buy does currently sell the Olevia brand in China through their Five Star chains and on their business web site. One reason stated at the BRLC conference call for it not currently being available in local stores is that the quantity of Olevia available did not meet the overwhelming demand. Demand for the Olevia brand has been back logged, but with the latest placement of 143 million in cash raised through a secondary issue, it is probable that we may find the Consumer Rated Best Buy Olevia LCD in our brick and mortar Best Buy stores. Myself, I would expect to see them available in Q2 08 (October – December 2007) as only BRLC’s cash constraints prevented the placement prior, but it is important to point out that just as the first rumor about Circuit City turned out to be completely false, so could the Best Buy rumor.
Misinformation about Sony (NYSE:SNE) selling a less expensive brand in Wal-Mart (NYSE:WMT), where the Sony brand will go head to head with a BRLC competitor Vizio, was also overplayed by the Bears that attempted to deflect the fact that Sony is possibly spanking a BRLC competitor as being harmful to BRLC, when nothing is further from the truth. In fact Wal-Mart has increased the Vizio SKUs to four models.
Wal-Mart must sell both the new Sony SKUs and the four new Vizio SKUs and obviously the Sony model will not be priced in such a manner to compete in a serious way with Vizio or in such a way to tarnish the Sony name. Sony, a conglomerate with massive fixed costs, can only trim so much lean fat off an already very shallow margin to fulfill the Wal-Mart shipment, while at the same time placing a product on the shelf worthy of the Sony name. Much Ado About Nothing is good Shakespearean Theater and often the Bears' tactic of overplaying any situation deemed exploitable.
Sarbanes Oxley, also known as the Public Company Accounting Reform and Investor Protection Act of 2002 (and commonly called SOX or Sarbox), is not only an “expensive” burden on any publicly traded company but also prevents them from “cooking” the books, as the Bears love to scream when they are at their deepest need for fear mongering. Given the onslaught of outlandish false rumors and outright lies, and knowing that reality will not stop the next conspiracy theory to arise, I fully expect more distortion, more false rumors, more fear mongering.
Given the fog of battle, what sounded to many Bulls as incoming artillery was later found to be mere spit balls. Syntax-Brillian’s share decline has opened an incredible buying opportunity that in our opinions offer today’s buyer an incredible bargain basement price. That is, if you have the stomach for more unsupported allegations
The 14.7 million Bear count is here to stay; they have become entrenched and would not be the first group of what Jim Cramer likes to call "pigs being led to the slaughter".
Salient facts: Both Target (NYSE:TGT) and Kmart (NASDAQ:SHLD) ran recent adds on the Olevia, and channel checks in the California area show an almost complete sell out of one SKU in Kmart and two SKUs in Target. US sales alone could likely exceed 270,000 units in Q4 07. Strong collection of receivables from SCHOT has reduced the one time 171 million accounts receivables to just slightly over 101 million, and is projected within the 120-day term by Jun 30th 2007.
Once accomplished we will see positive cash flow from operations this quarter. Olevia had a 2% total market share in China in 2006 and is expected to rapidly gain share to reach 5% market share in 2007, a market that could peek at 10 million units this year. Olevia has one of the healthiest margins and has an enviable sustainable 20% LCD gross margin. Larger average screen size should expand ASP while maintaining robust gross margins, with the Olevia soon to be released 600 series of LCD sizes in the range of 52” to 65”. 1.17 Billion in sales this year, and a forward PE of 6, is reiterated as a bargain basement price that simply will not last in our opinion. But only true Bulls with the experience and stomach for a rough and tumble ride need apply.
Disclosure: Author has a long position in BRLC
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