I am more concerned about inventory management. If networking revenue was down 10% but they burned off $5M of inventory (and gained cash) in the process it would be a net win. If the softness in networking grows inventory then I am very worried.

The metrics by which I think Vitesse should be judged are cash management, protecting the integrity of the existing business, and exploring strategic divestitures/combinations that would extract more value from them. I am not concerned about fluctuations in their end markets.

The fact that we see volatility now is a good sign that distribution is no longer buffering results.

Regarding your comment “Opex cut radically from 33M to 28M.” The actual statement on the call was “Operating expenses which are net of professional fees and depreciation stayed flat at approximately 28 million dollars.” I think Vitesse management misreported their Op Ex number on the November call and the $33M number they quoted in Nov. included the professional fees, I don’t know why else they’d refer to their December quarter Op Ex figure as remaining flat at $28M.

Given it’s half their business, how concerned are you about the comment Chris made in the last call regarding the softness they are now seeing in the networking segment? I believe his comment was “Consistent with our competitors, we have seen a softening in the end market here (networking) and we do expect this softness to continue somewhat into future quarters.”

also seems like crg is really playing up selling ethernet to the telcos. at the end of the day, can they rationalize the ethernet business without winning more sockets at csco?

at any rate, it was good to hear that things were picking up and hitachi and hp.

The Yakuza would offer better terms at this point than the existing T-Baum loan.

It surprises me why they need to give a range for consumption. I know semi companies 5X VTSS size that know exactly what sales-out are on a daily basis – so why doesn’t VTSS know 2 months after quarter close. It surprises me that a 20 yr company does not have these systems in place already.

I agree that the professional service fees are criminal. If I were being paid that sum, I certainly would take my time. The problem is that if they reduce those fees and hire an auditor, I can image that the audit fees will be equally criminal.

Finally, I don’t share your optimism on a flat quarter. It seemed that they mentioned SAS products would be down as well as core networking – unless I heard something wrong.

Thanks for the good analysis and look forward to your responses.