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HarryCarysGhost (99.69)

TASR the next Smith & Wessen

Recs

7

November 15, 2009 – Comments (7) | RELATED TICKERS: TASR , BUD

Humbly ask for the Fools collective opinion.

IMO- no debt, winning lawsuits( they just pay off the ones that insurance will cover)

constant new orders

New technology.

I don't understand what I'm missing here.

I've watched enough sci-fi movies to know that this is what they will be using in the future.

7 Comments – Post Your Own

#1) On November 15, 2009 at 9:57 AM, TMFBent (99.81) wrote:

Not long ago, the pitch in the street was that Smith and Wesson was the next TASR.

Sj

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#2) On November 15, 2009 at 11:20 AM, caterpillar10 wrote:

http://moneycentral.msn.com/investor/StockRating/srsmain.asp?Symbol=TASR

 

.....also, the fact that it trades under $5 makes it problematic for the bulk of institutional investors to get involved - to lesser degree same applies under $10. #of reasons for this to the effect that many fund charters specifically hold management back even if they think it's a good idea. That's the trade off w/small caps, small move = big %, but no big$flow in.    

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#3) On November 15, 2009 at 11:49 AM, Teacherman1 (56.55) wrote:

Spending a lot on R & D, so showed a loss for the quarter, but if over time the R & D pays off, could be a good company to own.

Right now, see no reason to own, but a good one to watch.

Don't think it is going anywhere soon, so no rush.

The "horror stories" and potential lawsuits (though probably exaggerated) make some skitish about buying in. 

As stated above, the price limits big money from joining in on good news.

JMO and worth exactly what I am charging for it. 

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#4) On November 15, 2009 at 11:34 PM, AirForceFool (99.92) wrote:

While my post below is from last December, most of the reasons still hold true IMHO... I haven't followed TASR to closely over the last year, but please feel free to rebut anything that may have changed... my bottom line is I think management has taken a great product, and run it right into the ground... Good luck to the longs though... it really is an awesome product...

Chris

Cross-posted from another board post December 2008 

If someone knows of a Fool with a better nose for lousy companies the Seth Jayson please let me know who he or she is. I’d read every post they ever made. I really think with Seth, it’s genetic… somehow, at the molecular level he’s able to smell corporate funk.
With that said, let’s now turn to early January of 2005 where he immediately starts lamenting some of Taser’s business practices such as insiders dumping $142 million in shares while revenues booked in at $60 million… yeah, that’s revenues… not profits… that would be bad enough… and we’re so enamored with the “potential growth” that unloading more than twice sales is overlooked because we’ll be rich eventually… it’s only fair to reward management for bringing us a product that will change the world, and make us rich in the process… stay tuned for the riches… cause they’re not quite here yet.
Seth’s post: http://www.fool.com/News/mft/2005/mft05011020.htm?...

TASR was recommended on December 17th 2004… the stock closed at $27.22. Two weeks later the stock ended 2004 on December 31st at $31.65… Fools were looking 16% gain in a matter of two weeks. Then came 2005, and in a matter of seven trading days we would see the stock tumble 55% to $14.10. Why you ask am I going on and on about stock prices that happened years ago and have little relevance to the company today, or the orders that are rolling in? Because I plan to make the argument that we can establish a history of poor management and poor choices that have consistently been at odds with shareholder interests.
Soon after the beat down, DG had this to say about Taser:
1/11/2005 We're going to have some of our stocks go against us, sometimes strongly so. That is what has happened to Taser. The company now has lawsuits out against it saying "you misled us," and perhaps management has, and maybe even criminally so. For my own part, I would continue to hold shares that I have. I also would not add to this position. I simply don't make it a habit of adding to losing positions, unless the company is a big-cap flush with cash (let's say, Best Buy) that I'm confident will be around in 15 years. I can't say that for Taser.
Pretty sound advice in my opinion. It’s never too late to learn from past mistakes, and while some Fools may only salvage a portion of what they sunk into TASR, do we really think that management will change, and start making us money. Trust me… this product is a Rule Breaker through and through. But if it’s a Rule Breaker that can’t make money for investors, then I’ll have to pass. You can argue all you want about the fact that the stock is so beat down that it really can’t get any cheaper. Hard for me to argue against that… especially since I don’t necessarily see them going completely out of business. But here’s the catch… there’s nothing saying that management can’t simply continue to fritter away all the profits year after year, keeping the stock depressed, and management taking sweet vacations each year with the stocks they’ve “gifted” to themselves and cashed in.
So let’s take a more up to date look at the company. From the November quarterly release:

We may experience difficulties in the future in complying with Sarbanes-Oxley Section 404.
We are required to evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002. Beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2005, we have been required to furnish a report by our management on our internal control over financial reporting. Such report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. Such report also contains a statement that our independent registered public accounting firm has audited internal control over financial reporting. In our Form 10-K for our 2005 fiscal year, because of our previously reported material weaknesses related to not having controls in place to record appropriate accruals related to professional fees in the appropriate accounting period and inadequate resources related to accounting and financial statement preparation particularly with respect to financial statement footnote preparation were not fully remediated and tested at December 31, 2005, our management assessment and the report of our independent registered public accounting firm concluded that our internal controls were not effective at December 31, 2005.
Because of our prior material weaknesses, there is heightened risk that a material misstatement of our annual or quarterly financial statements will not be prevented or detected. While we completed our remediation efforts to address these material weaknesses and did not identify any materials weaknesses at September 30, 2008, we cannot assure you that material weaknesses will not occur in future periods. In the event that our chief executive officer, chief financial officer or our independent registered public accounting firm determine that our internal control over financial reporting is not effective as defined under Section 404, investor confidence in us may be adversely affected and could cause a decline in the market price of our stock.


…decline in the market price of our stock? You think perhaps? Don’t get me wrong, quite often companies make statements like this to cover themselves in the event of a future incident… but sheesh… how in the heck is this supposed to instill confidence in Joe or Jane investor when TASR is looking back 12 quarters and saying “yeah, we’re not sure we’ve quite figured out the problem… it’s really complex dude… you just don’t understand… we just can’t assure you that it won’t happen again.”

Looking at the quarterly info (arguably not my strong point): comparison of first three quarters of 2008 to first three quarters of 2007.

Net sales down 5% ($3.3M decrease)
R&D nearly tripled from $3.2M to $8.5M (not always bad, but needs to create future gains)
Net income going from $10.5M to the upside to negative $149K… POOF!
Salaries and Benefits increased by 28% (an increase of $1.45M)
Advertising up 237% (from $.54M to $1.8M)
And while bonuses are off sharply from $750K to $160K, stock based compensation is up 30% (up from $721K to just under a million)
Overall Sales, General and Administrative Expenses are up 16%

Quote: Net sales decreased $5.7 million, or 20%, to $22.9 million for the third quarter of 2008 compared to $28.5 million for the third quarter of 2007. We believe the decline in sales versus the prior year reflects lower municipal spending in the U.S. as agencies reassigned budget dollars due to economic constraints. As a result, sales of the TASER X26 product line decreased by $4.1 million, or 24%, to $13.2 million for the third quarter of 2008 compared to $17.3 million for the third quarter of 2007. Single cartridge sales also decreased by $1.6 million, or 24%. Sales of the TASER C2 Personal Protector consumer product, which began shipping in July 2007, also declined by $0.7 million. The decrease in TASER C2 sales can be attributed to the impacts of the economic downturn on consumer spending.


Specifically about the R&D:
Quote Research and development expenses increased $5.3 million, or 164%, to $8.5 million for the first nine months of 2008 compared to $3.2 million for the first nine months of 2007. The increase is driven by a $2.8 million increase in third party consulting costs primarily associated with the development of AXON (Autonomous eXtended on-Officer Network). We expect to further increase research and development spending in the fourth quarter of 2008 as we accelerate development of new products in the pipeline. In addition, there was $955,000 growth in salary costs with headcount increasing 41% from 27 at September 30, 2007 to 38 at September 30, 2008, and a $711,000 increase in indirect supplies to support our continuing efforts to develop new products such as the XREP (Extended Range Electro-Muscular Projectile) and Shockwave.

Sounds expensive to develop new products… they add 11 people and salary costs go a million dollars… I hope they’re management… no, that won’t work, they’ll just issue themselves shares and then sell them… well, maybe they’re just very well paid engineers… oh, and let’s not forget that there’s an increase of nearly three quarters of a million dollars in “indirect supplies to support…”
I wonder if I asked nicely if they’d send me the statements of work for the new hires. Probably not.

So let’s flesh out if TASR is still the Rule Breaker it was once believed to be:
The signs of a Rule Breaker…

Sign No. 1: Top dog and first-mover in an important, emerging industry.
Well, top dog and first-mover… sure, I’ll buy that… “in an important, emerging industry”… perhaps not so much… to me an important emerging industry is constantly in the process of making progress… TASR has languished over the past couple of years… sure they’re making new products, and trying to move forward, but sheesh, is an emerging industry really that important if it takes a decade to make inroads… look at ISRG for example… they’re increasing procedures, and you can actually see long term benefits that will be permanent… First-movers are supposed to “seize a temporary edge over the competition and then exploit their advantage”. Let’s face it folks… this just isn’t happening… I’ll give TASR the kudos for having inept competition, but that should make it soooo easy… can you imagine what TASR could do with competent management? But I digress into sign number 2.

Sign No. 2: Sustainable advantage gained through business momentum, patent protection, visionary leadership, or inept competitors.
Business momentum… nope… patent protection… I’ll give them that… visionary leadership… hardly… inept competitors… I’ll give them that as well, but they sure haven’t been able to capitalize much on that. So all in all, I’d say fail on sign 2… patents are nice, but you have to actually use them to make more money then you spend for it to be worthwhile. Seriously.

Sign No 3: Strong past price appreciation
http://finance.yahoo.com/q/ta?s=TASR&t=my&l=on&z.....
The chart says it all… nope! Heck, never mind the mind-numbing beat down as of late, you can even look at most of 2005 and 2006 and see the stock flat at best.’

Sign No 4: Good management and smart backing:
To quote DG “This is the most important attribute of all – and it might be the most difficult to get right.” What can be said about TASR that will reflect smart decisions and smart backing? Granted you could argue that they’re backed by numerous law enforcement agencies… but in this market I’m not sure how much loot municipals are gonna be funneling into TASR.

Sign 5: Strong consumer appeal:
I would say yes, but then I’ll have to caveat the yes… while there is strong consumer appeal for TASR products, there is almost as much bad press against the product that tends to negate a good bit of the strong consumer appeal in my opinion. Rule Breaking companies provide products or services that improve the quality of people’s lives. For TASR, I happen to agree wholeheartedly that their product improves the quality of lives… both on the law enforcement side of the house as well as the alleged perpetrators. But there are still folks bent on saying how dangerous TASR products are.

Sign 6: You must find documented proof that it is overvalued according to the financial media.
While it’s hard to argue that TASR is completely overvalued at the crazy price of $5 a share, that’s exactly what I’m going to do. Look at the Trailing and Forward P/E (70 and 83 respectively). Yeah, those are the kind of numbers you get when you don’t have squat for earnings… now to be fair, you can’t really blame TASR for sinking a good portion back into R&D… fair enough… but eventually we need to see the bottom line move… and a high P/E that is accompanied by generous stock compensation packages, and litigation expenses isn’t really what I had in mind for documented proof. But hey, I’m funny that way.

From Fool meeting with TASR CEO and CFO on 2/7/2008 (TMFAdamJoW):
- space-age entrance – security similar to a diamond dealer
- black & shiny metallic finishes on everything; 3 flooropen beehive layout
- high security – retina scans, even to use the bathroom
- met in a conference room overlooking the desert and Arizona mountains


So at least we know where the money is going… retina scans to take a leak… seriously, how does that even come up as a good idea to fund? Idiots…
Management also said settlements (estimated between $200K and $500K) were “not terrible or material to the business”. Huh? You pay out somewhere in the neighborhood of half a million dollars and it isn’t material… I’d like to disagree if that’s alright.
Foolish Bottom Line: I think TASR has a Rule Breaking product, and could be a great company… but history has proven that management is not capable of executing like they need to in order make TASR a company worth owning. I hope they finally pull their heads out and get it right… but hope is a lousy investment strategy.

Fools have taken enough TASR... now it's time for you to TAKE THAT!!!

Chris
I figure I’ve rambled on enough, now I’ll wait for Fools to rebut, and hopefully we can get a nice Bull/Bear argument going.

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#5) On November 19, 2009 at 10:26 PM, HarryCarysGhost (99.69) wrote:

Chris
I figure I’ve rambled on enough, now I’ll wait for Fools to rebut, and hopefully we can get a nice Bull/Bear argument going.

 Thank you for your reply, that answered my question perfectly.

Since I own probably less then %1 Tasr in my portfolio I'm letting it ride.

But at least now I know how to vote my shares.

Msftgev.

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#6) On November 19, 2009 at 10:35 PM, IIcx (< 20) wrote:

looks like you missed the "Starwars" press release ; )

http://boeing.mediaroom.com/index.php?s=43&item=941

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#7) On December 23, 2009 at 7:18 PM, blesto (31.88) wrote:

I'm a believer in the product, but now I'm not a believer in the management.

Here's to shareholder voting power.

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