SONICblue bins refinancing plans

SONICblue has scrapped plans to seek private equity-financing, citing current market conditions.

The company can always dip into its rapidly depleting pot of UMC shares (there are two entries for UMC investments on SONICblue's Q4 balance sheet, amounting to just over $163m at December 31, 2001, compared with $500m worth of shares in July 2001), but this will reduce the safety margin in SONICblue's shares (as well as cutting investment income for the company), if it continues to produce operating losses.

Last week, the digital consumer electronics hardware maker said it had completed cost reduction plans, removing 15 per cent from the operating expenses base, largely through "non-personnel means" (there was a huge staff exodus last year).

And yesterday, the company said it anticipates Q1 revenues will come in higher than consensus analyst forecasts of $58m.

This is the second quarter in a row that SONICblue has announced better than expected revenues. And no doubt Q1 will be the third quarter in a row that the company proclaims "strong" results when it files the figures sometime this week. Some of the things to look for are: how much cash in hand does the company have, how many shares in UMC does it hold. And most important: is it turning a profit, after all the expense cuts, and rising sales.

On the other hand, "better than expected" is something to discount. This is unlikely to be a three trick pony. Analysts rely somewhat upon the companies they follow to provide them with accurate sales guidance. They get cheesed off rather quickly if they think they are being manipulated.

Finally, SONICblue's new CFO, David Sugishita, resigned on March 22, with immediate effect and by mutual agreement, after less than two months in the job. Ken Potashner, CEO and chairman, said in a statement at the time: "Although we are disappointed that our relationship with David Sugishita did not work out, we continue to be highly optimistic about our strategic and financial progress."

That's not really good enough, is it? ®

Related link

SONICblue Unveils Plan to Return to Profitability (Press release June 12,2001)