Soapstone Networks Reports Q1 2009 Results

April 30, 2009 · 2 Comments

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GAAP loss from continuing operations for the first quarter ended March 31, 2009 was $8.1 million, or $(0.55) per share, compared to a GAAP loss from continuing operations of $5.5 million, or $(0.37) per share, in the prior year’s first quarter. Including income from discontinued operations, GAAP net loss for the first quarter ended March 31, 2008 was $3.7 million, or $(0.25) per share. Because there is no income from discontinued operations after December 31, 2008, GAAP net loss for the quarter ended March 31, 2009 was the same as GAAP loss from continuing operations for the same period.

 

 

Highlights from Conference Call

 

- Cash, cash equivalents and marketable securities totaled $82.3 million at March 31, 2009.

 

- The company, which said in February it was exploring strategic alternatives, expects severance and related costs of about $500,000 in the second quarter.

- Management sees overall incremental savings of about $3.0 million during 2009 as a result of the job cuts announced April 14, in addition to the $5.0 million in savings it expects from a workforce reduction it announced in February. Since Feb 12, 2009 permanent headcount has been cut by about 10 percent and contractor workforce by about 75 percent.

Updated Valuation

 

Not much has changed since our March 9, 2009 post on SOAP, with the exception of nearly $8 million cash burn relative to the December 31, 2008 results. Because of this, net-cash value has been reduced to $5.33/share, a substantial difference compared to its current market price of $3.63/share. We added SOAP to our portfolio when it was trading at $2.86, for an unrealized gain of nearly 27%.

 

soap_q109_update

SOAP's Balance Sheet as of March 31, 2009

 

 

Categories: Net Cash · Update
Tagged: SOAP, Soapstone Networks

2 responses so far ↓

  • Davis // April 30, 2009 at 1:40 pm | Reply

    I looked at SOAP two months ago and passed based on the risk that management would just bleed the company dry. It appears this is beginning to happen. Expenses rose in absolute terms this quarter which surprised me because they have no A/R to collect, don’t have any products to sell, and aren’t really developing anything. How does a shell of a company legitimately increase compensation? Note, too, that accruals increased over last quarter and the footnotes for the expenses all cite rising “labor and labor related” costs.

    My hunch is that management engaged the bankers for optical purposes, namely to give investors hope that the company might liquidate or sell itself. I don’t know if management actually has malicious intents, but with $76mm in cash to go, they probably aren’t rushing to figure out what to do next, and shareholders are probably holding back a little bit thinking that the bankers will encourage the company to liquidate/sell.

    I don’t mean to rain on anybody’s parade, and do sincerely hope that investors see some returns, but I fear that may be an unlikely outcome.

    • ValueHuntr // April 30, 2009 at 3:12 pm | Reply

      Davis, you are correct regarding SOAP’s cash burn. But notice that the company announced they were cutting 40% of the workforce after March 31, 2009, so the benefits of this labor cut are not reflected on the earnings reported this morning. We expect cash burn rate to slow down due to these costs, and considering the huge gap between net cash and price we believe it is a smart risk to take.

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