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Chapter 36: Tales from the Towers – And back into the Frying Pan: Part 2

Chapter 36: Tales from the Towers – And back into the Frying Pan: Part 2

I’ve rewritten this article several times in the last few weeks due to the sinking stock price of Ubiquiti.  Since this article was based on where I thought the companies were going and Ubiquiti stock was sinking faster than Eddie Murphy’s box office appeal from Pluto Nash, I was hoping to see things settle down first.  Right now it’s almost impossible to make any predictions.  However, I’m going to anyway because I have as many opinions as Obama has excuses.  I’m willing to stick my neck out if I have some reasonable foundation to base my prediction on, but frankly these may be as much a coin flip as anything else so clearly don’t base any investment decisions on it.  I never saw this crash which means I’m as clueless as the next guy when it comes to investor mentalities.  Other than the typical annual or bi-annual stock shortages which the supply chain it totally used to, I can’t figure out how a company with their numbers and expanding product lines goes down by 2/3rds in stock price.  I’ve also delayed because I’m down to typing with two thumbs which is slightly slower, albeit some may say more accurate, than my usual technique (if you ever find your arm pinned to your chest for a month, I heartily recommend the Azio thumb keyboard).

Ubiquiti’s IPO has gone from boom to bust.  When the IPO came out, I thought great sales, great profit, and what I saw was a great future based on what was coming out.  Then they throw X-concepts under the bus to keep the United States government happy, pick a fight with a counterfeiter (which could be be same guy but I haven’t figured out all the players yet), and then get back-doored, look the other direction, or actively participate in sales to Iran and possibly other countries not on Uncle Sams Christmas list (not sure which at this point).  So many variables so much intrigue, not enough truth that is public yet.

If Ubiquiti was still a private company, more than likely most of us wouldn’t have cared.  There were rumors for a long time but after the fine referenced in the IPO, most of us just assumed it was over.  We thought a couple million here and there for lawyers and settlements and this is over.  With the global economy what it is today and the fact that Syria rebels now has mysterious tank busters that nobody seems to know about, a few WiFi radios weren’t going to be that difficult to import if Iranian customers really wanted them whether Ubiquiti knew or not.  Unfortunately, a lot of investment groups have now sunk millions of dollars into what they thought was the next golden boy from the Apple tree, Robert Pera.  Now they find out that the Ubiquiti fruit might have been grown with the help of outlawed fertilizer.

Even as we discuss this, the stock is still going down.  The driving force now is the investment community that sounds as stupid as they are paranoid.  After watching NBC’s brilliant analysis where they quote 2 things,

1) Ubiquiti front loads by booking sales to distributors instead of sales to end users.  They used Cisco as the comparison which is only appropriate since Robert said he wanted to be the next Cisco.  However, this was incredibly stupid because they clearly don’t understand that Ubiquiti doesn’t floor hundreds  of millions of dollars of equipment with distributors like Cisco does.  In addition, there isn’t enough inventory of needed products to supply a WISP setting up summer camp with 20 cabins with any distributor half the time.  When Ubiquiti actually starts meeting demand, and I’m hoping that day comes before my retirement, then you can use this information as a decision point.  Most of the products go in the front door and out the back door in 48 hours because they simply can’t meet demand for key products.  I just had to order AirRouters from some Latvian supplier through eBay and that my friends, is pathetic (BTW, never do that, some FCC issues there so pay attention to the location of the supplier which I didn’t).  Most companies would kill for that kind of product demand problem.  What I can’t figure out is why the investment houses and analysts are taking their eyes off the sales/profit numbers which clearly are excellent.

2) An increase in accounts receivable.  Yea, the fact they can’t deliver products to the end users means more orders and nobody is paying until equipment starts showing up.  Not much there to concern me unless the next time an NS2M gets delivered to my office, its Santa bringing it.

Here is the reality of starting a company on a shoestring.  You make some hard decisions that you may or may not be comfortable with to keep the company afloat.  I’m not saying that Robert should have sold product to Iran to stay in business nor do I even know his level of involvement at this time.  I’m certainly not defending it on any level if he did.  If they did that, I think Ubiquiti got off scot-free for $1.5 million dollars.  However, if it’s me, I would have handled it differently and it all would have been legal.

Thanks to our pathetic President needing some tough guy points politically, his administration basically told the world how Stuxnet and Flame (I’d kill to see what websites the Ayatollah visits after finding the adult magazine collections that Obama had.  Hypocrisy, thy name is religious fanaticism) were delivered to our enemies in Iran and elsewhere.  If Robert was smart, he could have used his equipment to do something good for the United States in the same manner by tacking these viruses into the firmware.  In fact, who’s to say that’s not what happened and they can’t talk about it.  There are way too many unknowns in this situation for anyone to make a decision.  I do know that both those viruses got into the country somehow and they were both successful.  Instead of beating up on Ubiquiti and their stock, they might be due a parade.  I just don’t know at this point and until that happens, I’m reserving judgment.  Believe me, if they did do it intentionally and I find out about it, I’ll hammer Robert Pera and Ben Moore like shingles on a roof and demand they resign as should the shareholders and the board.

However, the federal government looked into this, asked them to pay a fine with no jail time, and accept the results with no criminal proceedings.  At this point from a legal standpoint, it’s done.  I don’t believe for a minute that the commerce department, or any government agency short of the FBI, CIA, or NSA, is competent or ethical enough to monitor my kid’s piggy bank, but the deal is done.  Clearly the Justice Department couldn’t do much since Eric Holder has turned them into an oxymoron.

The founder of X-Concepts is also putting out a lot of data publicly with supposed emails.  Maybe it’s legitamate, maybe it’s not.  Let’s say they are doing it and simultaneously shorting the stock or buying it while it’s in the tank.  That would be one of the best methods of stock manipulation I’ve ever seen.  At the same time, if they can counterfeit radios, I’m thinking they can counterfeit emails.  Look up my name in Google with Multicast Media and there is a bogus story about a lawsuit filed by an ex-partner who we caught embezzling.  The lawsuit never happened but he had his friend plant this lie to try to keep us from prosecuting him.  Anybody can make stuff up so I take the email proof on the X-Concept site about as serious as I take the story on me.  Now, it would be really good if Robert would simply come out of the cave he lives in and deny this stuff publicly.  Investors and customers would really like some face time on this.  The fact he hasn’t makes him look like he is hiding behind lawyers and that’s what’s fueling the stock drop.

The worst that could result from all this is that Robert Pera steps down from the company.  The reality is that the methodologies he put in place to make Ubiquiti successful today are now well known.  The product lines are fairly well defined and we know of several new products coming out.  We also know the target is Cisco and Juniper, and since Ubiquiti still isn’t even close to those product lines yet, we know where their R&D is going for the next several years.  Now throw in a custom chipset that is being delivered in the first product within the next 30-45 days (Ben told me, I believe him, and that’s that because he is never wrong on those estimates) along with already announced products, and it’s evident that even if Robert wasn’t running the company any longer, his legacy is imbedded for the next several years.

The other part of that reality is that Ubiquiti can’t deliver enough products because sales are still growing at an amazing rate.  This quarter might stink because they simply didn’t have enough stock, but that’s going to end very soon.  The third quarter is probably going to be stellar not only from people refilling cupboards that have gone bare, new WISPs that are starting up, and from existing clients that will be upgrading to some of the new products to enhance current deployments.

Okay, enough about Ubiquiti.  Let’s talk about Cambium.  Yawn.  Wake me up when something actually happens because marketing certainly hasn’t set my alarm clock yet.  Not much to report except for the fire sale on the PMP 100 series equipment and some battleship is now using BATS systems coupled with PTP600 radios.  Oh wait, I almost forgot about the 450.  Actually, nothing to add to the last report either other that the PMP450 series was delayed until somewhere between August and December either.  The quiet is kind of annoying actually.  I’m sure that there is a lot of scrambling on the 450 right now to get it out because the natives are getting very restless.  At this point, with little communication between Cambium and its customer base, even the most loyal WISPs are cheating on them big time.  If the Titanium starts shipping before the 450, and it looks like that race is probably over, the 450 is going to have some serious catching up to do.  I’ve already got plans for the Titanium assuming the firmware isn’t on Beta 82.  The lack of GPS on the early Titanium products though, means that the 450 with GPS will still have a place, albeit a smaller one when it does come out.

So if you are starting your WISP tomorrow, I wouldn’t change any decisions based on what is happening, but what has happened.  I stand by which vendor I would use based on the type of deployment I was making.  Except for Ubiquiti’s stock price being dictated by lots of people with lots of money and not one speck of knowledge about our industry and Ubiquiti’s role (if they really understood it, they would be investing like crazy and using their lobbyist to keep CAF and the FCC from screwing it up), in my opinion, nothing has changed.  If you haven’t deployed Cambium but that’s the way you want to go, use the 320, the 430 or wait for the 450.  Hopefully, they will actually give some type of updated delivery date.  If they don’t by the time you need to make a decision, look to Ubiquiti.  If you are planning on deploying Ubiquiti, budget enough money to have 6 months of supply on hand to make sure you don’t get caught in the next wave of Chinese New Year which is the excuse for not managing your supply chain properly.  If you have a moral position on the shipments to Iran (and it’s not in dispute whether that happened, just whether the company knew about it), then wait for the truth or just buy Cambium.

At this point, my thumbs are really getting tired so I’m going to make this the shortest article I’ve written as opposed to my last one.  This way it kind of balances out and I keeps my thumbs in shape to tear open the cellophane package around the, wait for it,

CHOCOLATE FILLED TWINKIES.  Oh yes, the second perfect food was finally created.

 

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