Final chance?Posted: September 24, 2013
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We are closing in on the end of MER Telemanagement Solutions’ third quarter in its fiscal year 2013, and the question that faces investors and prospective investors is the same as that of last quarter: Will the company do and say the right thing?
As I have written about in the past, MER Telemanagement Solutions, an Israel headquartered company that I follow with quite a lot of interest (see here for background information about the company,) has lost its largest customer contract (with an expected significant revenue impact in the company’s fiscal year 2014) and, accordingly, the market has reacted by issuing a strong correction to the per share price of MTSL, the company’s equity.
In fact, in my opinion, the market has overreacted to the loss of the key customer contract, and the company has strong opportunity to continue operating a sound business if it immediately reduces its expenses in anticipation of the changed revenue and margin profile in fiscal year 2014.
Simply put, reducing its operating cost just a little bit will allow the company to continue to operate profitably while it captures new, high margin, high revenue deals to offset the revenues and margin contribution from the lost customer contract.
That’s the doing. The saying is even easier than the doing. All MER Telemanagement Solutions needs to communicate to the market and its shareholders — in a straightforward and open way — is the plan for expense reduction. Informing the market and the company’s shareholders of the existence of an immediate (and preferably ongoing) plan to reduce expenses will, in my opinion, immediately restore the market’s confidence in the company and MTSL.
If there is a better and less risky plan than simply reducing expenses (which, of course, is simply intended to trade space for time,) then, of course, the company should execute on this, better plan and inform the market and its shareholders of virtues and specifics of the plan.
It should be easy, but here is the kicker: The company had the same opportunity to do and say the right thing in the first quarter of the fiscal year and managed somehow to squander it (read about this here.)
To make matters worse, the company had another opportunity for doing and saying the right thing in the second quarter of the fiscal year and — believe it or not — it managed somehow to squander it again (read about this here.)
I don’t know if the reason for not doing and saying the right thing is arrogance, faith, hubris, bad advice, incompetence in management and public relations, or ignorance, but, as they say, time is up.
Although the company may have until the announcement of the first quarter results in April or May of 2014 before any impact of the loss of the key customer contract is felt, it is clear to me that the market will be drawing a line in the sand sometime between October 1st, 2013, and the date of the announcement, and, so, now is effectively the last chance for the company to do and say the right thing.
I have to confess that I have concluded from an earlier issue around the company’s loss of the key contract that MER Telemanagement Solutions has a tendency to not communicate in a forthright manner with its shareholders, which is unfortunate and eventually, I believe, has the potential for getting the company in a great amount of trouble. However, I would expect that on this issue, which is of great import for shareholder confidence, the company will have to walk another path (certainly, the path it walked when releasing its first and second quarter earnings releases has been proven to be the wrong one.)
I, for one, can’t wait to see what they are going to do next.
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