Without giving too much away, I work in professional services and most of us have been sitting idle since the end of 2021.
I was told by a high-level person recently that sales was directed to only sell services if bundled with product. Basically seem to be abandoning professional services.
Maybe this April 2022 availability to take the company private will be a catalyst for more layoffs. I can't imagine the execs not noticing that we're all just sitting around.
@guwj+1g3tkMlD I agree with most of what you've stated. However, it is a fallacy to focus on HN & legacy Arris as for Comm current plight. CommScope was in dire straights when it tried to save itself by acquiring Arris. The stock was trading at circa $41 March 2018 and had fallen to circa $20 when it announced its acquisition of Arris in November 2018, a whopping 51% decline!! Hardly a company on a growth trajectory. Some bright spark then decided, I know, lets make the situation worst by acquiring Arris using leverage, rather than focus on turning existing Comm business around.
Economics 101: Do not use leverage to buy a company with a declining bottom line!
It now appear that a thorough DD wasn't carried out before Comm decided to acquire Arris for $7.4B. That decision is responsible for the current situation, not HN, not legacy Arris. Covid was unexpected. However, management had ample time to cut costs aggressively during their synergy review. I'm of the opinion that Comm did not have a thought out game plan when the decision was made to acquire Arris. An acquisition should strengthen the acquiring company's business. Not in this case. From day 1 it has been, acquire and blame!
From Light Reading:
"And while demand and backlog orders at CommScope look strong, the company "could face challenges in 2025 and 2026 repaying debt," the analyst warned. He noted that the company has $1.3 billion due in 2025 and $4.5 billion due in 2026, with less than $500 million on the balance sheet now. "[W]e expect it will take actions to shift its debt schedule," he wrote. Leopold also expects CommScope to have trouble raising prices for its operator customers amid higher costs driven by inflation and persistent supply chain constraints."
The monthly payment on $9.7B of debt assuming 2% interest rate is $16.7 million. That is a lot of money to be shelling out of your free cash flow. They need to figure out how to refinance the 2025 and 2026 notes that are due fast because their current FCF or cash on hand isn't covering it. Even refinancing now will end in a higher interest rate and larger monthly payments.
If raising prices especially in HN isn't going to bear fruits till a few quarters from now, I don't think the company has any choice but to shed staff. That is, if they were smart, but that part has been in question for a few years now. As mentioned, the stock price is at 52 week lows and if any part of the ER report on May 5 including the 2022 outlook is not good, then we are looking at another major hit to the stock price. Buckle up folks because the next few weeks will be rough and there is only so much accounting magic you can do with that kind of debt burden and a lot of management payroll, especially on the legacy Arris side.
There are some large global cable manufacturing companies that might be interested in just the cable-manufacturing and passive fiber hardware business.
The stock isn't waiting for May 5th to start setting historic 52 weeks lows! So, folks better hope that by May 5th the stock is on an upward trend! Bad numbers, this could fall below $1 at which point the Nasdaq listing will be in jeopardy! Comm is HMS Titanic heading straight for that iceburg=leverage burden.
If the numbers are bad on May 5th, one would expect to see an historic 52 weeks low! At that point, the question will not be about buy-out, but more about chapter 11. Conspiracy theory:Carlyle want the stock to fall as low as possible so that they can then take the company private for as little as possible!
Ohhh a buyout! Speculation on who would be interested in taking on so much debt?
Lololol…. Another 52 week low today. Lower on the horizon. Relations between India and China worsen as they support Russia bypassing the weak sanctions, higher rates, debt terms around the corner, I smell a buyout.