Broadband solutions company C-COR
This makes two straight quarter-by-quarter declines in revenue and two consecutive quarters in which the company pre-warned that results weren't going to meet estimates. As a result, estimates for the fiscal year ending June 2005 have dropped from $0.42 to $0.21 over the past three months. More worrying still, the company reported a quarter-end backlog of $31 million -- pretty meager compared with the $58.5 million in sales reported for the quarter.
Is there cause for hope here? Surprisingly, yes. Because of a yearlong acquisition binge when management acquired five companies, C-COR now has footholds in some very appealing markets. Digital video, voice over Internet protocol, video on demand, and HDTV are all major growth opportunities, and the company is well-positioned to supply equipment, software, and support to cable providers that want to expand into these higher-margin services.
Given the current unsteady state of the business, valuation is tricky. The trailing price-to-earnings ratio of 55 looks ugly, but the shares trade at only 1.6 times the book value -- not bad versus larger competitors such as Arris Group
The cable TV world is certainly undergoing change as cable providers like Time Warner
C-COR is certainly positioned to take advantage of this new build-out cycle, but good prospects don't make shareholders wealthy -- that takes earnings and free cash flow. Fools who want to take a high-risk flier on a tech turnaround may want to take a look, but more cautious investors might just want to watch this one on cable TV.
Fool contributor Stephen Simpson is a chartered financial analyst and has no ownership interest in any stocks mentioned.