After Q1/Q2 results are in, there is obviously disappointed in the numbers and fear setting in again. For me, the disappointment is the delay in profitability. As I mentioned, in the Aug. 1 call, Barton and co. mentioned being cash flow/Gaap profitable in early 2008. Depending on when revenues are recognized, I do believe they could be profitable in some quarters in 2008. Anyway, lets summarized some of the info.

As of end of Q2, they have a net $148m. They also have $100m Gemdale holding, $20m Infinera, $20m others. Thats roughtly $300m. In an earlier post, I had mistook the additional $36m they had generated in cash as operational but instead we now know its from borrowing in China. The company also provided guidance that it would be net cash flow even because of this. They will burn through $35m in Q3 (hence the net cash breakeven). So, in essence they have $265m and more than half is in securities that are still flucutating. This already takes into account the special interest payment that is due in Sept and most/if not all costs associated to the investigations/filings.

The current market cap is $467m. So, enterprise value is around $200m. If you believe the PCD division is worth around $200m, then the rest of the business (core, PAS, other non-core) are valued at $0. This is very simplified way of looking at it and really depends on PCD valuation which is arguable. I use the PCD valuation in a lot of discussion because it is non-core, generates cash, improving from when they bought it and highly probably that it will be sold and atleast we know what they paid for it a few years ago. Anyway, as the cash burn rate continues, the stock price may continue down if the market continues to value those items at $0. If the stock stays constant, that means the market is assigning a higher valuation to assets despite added losses because they think it is coming closer to profitability. This makes sense because if it was not losing money, then obviously, there would be value to these assets.

Back to burn rate/earnings est. The above updates the liquidity situation up to Q3. Right now, Q3 estimates are for 41 cent loss or about $50m. The magnitude is consistent with Q1 and Q2 as one analyst pointed out but Barton alluded to OPEX being lower.

In Q4, they will complete the restructuring and incur $10m more in costs. Analyst estimates are for a loss of 31 cents on flat revenues. Thats another $36m in losses. So, if the price holds up and they actually burn through $36m cash, then enterprise value for core/other none core and PAS becomes $36m. Obviously, the guidance for Q4 will make a difference and we will know in 2 weeks. Most of the rev gains in Q3 will be from PCD. Q1, Q2, and Q3 therefore had very little broadband/wireless (network solution) sales. So, I am assuming that Q4 should have an increase in those categories and GMs will be higher than in Q3. Costs should be a little better but will have the one time $10m restructuring charge but will not have the special interest/investigation costs.