Sonoma County: News and Notes

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This week I am going to look at the earnings of Cyan Optics. They reported on Monday. Cyan reported some news that was good but overall the company is heading for some great difficulty. The revenue that was announced was significantly above the guidance provided on the Q1 call. On top of that, the company announced it had received an order for $10M from an existing customer. This order is due to ship in Q1 of 2015.

Now for the bad news, the cash burn of the company was down but they are now have much less than 1 year of cash left. Without a significant change in the business, they will not make it as a company. Just to put the numbers in context, this quarter the company had $24.4M in Revenue. To get to break even (with the current numbers), the company would need to have $59.4M in revenue. That means that Revenue would need to more than double without spending an additional dollar in Operating Expenses.

That last is why that analysts on the call talk about revenue for Cyan's "Blue Planet" product line separate from its Z-series of Optical Equipment. Cyan has been touting the power of Blue Planet in a multi-vendor environment. It looks difficult (if not impossible) to sell a lot more of the Z-series of equipment. The space that the Z-series is in is crowded with lots of players, many of them much larger than Cyan. It looks like that Blue Planet is the one thing that Cyan can show as a step above its competition. Since this software is not tied to the Z-series it is possible to be sold when the customer does not buy it. This represents a possible way to solve the Revenue problem. To date, the company has not talked about any Blue Planet Revenue that comes from customers that don't buy its other gear. It has declined to talk about this even when asked directly about it.

Well, where does this leave Cyan? The obvious conclusion is to sell the business. The company has some good products and people, but is quickly running out of money. The challenge is where to raise new money. Given that the company is public, they would have to do a secondary offering at a price much lower than their IPO. I am not sure that this would fly with the investing public. Given the small size of the company, they might be able to get a better premium if they get open bidding. I would think an announcement of retention of "Strategic Advisers" is the way to get that started.

Next week is Enphase!

Jim Sackman
Focal Point Business Coaching
Change Your Business - Change Your Life!
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