Utek: A small cap on a mission
Today's Financial News - Posted August 12, 2009
Investors love a good small cap and professors love to become consultants. Can Utek Corp. (AMEX:UTK) bring the two together and make some real money?
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): As a recent b-school graduate, I am all too versed in the jargon of the times. In the final semesters of the program, if I had heard one more permanent member of academia spout off about lean manufacturing, value-added principles, Six Sigma, scorecards or the importance of a good mission statement, I would have dropped out and join the Peace Corp.
Most of these tenured professors never stepped onto a manufacturing floor or dealt with the cultural phenomenon cultivated in a cubicle farm, let alone tried to run one. But somehow they are getting six-figures a year to tell me how to do it.
When these bookworms are not in the classroom, they are padding their income, working as “consultants.”
Now, I fully realize the incredible value that can be a good, qualified consultant. But after spending two years working side-by-side with plenty that did not live up to standards, you can bet I am skeptical.
If you want to learn about the latest in hip business trends, give them a call. But if you want to turn a losing corporate strategy into the next billion-dollar acquisition target, you are better off burning your cash. At least then the government might give you some free carbon credits.
Strategic nonsense
After reading through Utek Corp.’s (AMEX:UTK) latest earnings figures, it’s obvious my pessimism for the consulting industry is shared by many. If a company wants to tell you how to run your business, they certainly better be running a strong one of their own.
That does not appear to be the case for this $55 million “strategic innovation” firm.
Utek reads like something out of an abridged MBA handbook. Words like “systematic,” “innovation,” “enterprise-wide,” and of course, “strategic” are engrained in everything the company does.
Even with all of the latest and greatest in consulting jargon, the company has little to offer small-cap investors looking for a big break.
The nearly 50% decline in the company’s top line proves fewer and fewer customers are knocking at its door. After recording $4.9 million in revenues during last year’s second quarter, Utek told its shareholders earlier this week it received just $2.6 million worth of business during the past three month.
That’s not a good sign for a “growth” stock.
Subtract all its expenses (its executive suite filled with lawyers, CPA, financial analysts and doctorates does not come cheap) and Utek was forced to record a loss of $6.2 million, a figure substantially higher than the last corresponding quarter’s loss of just $541,000.
While I am admittedly bearish on Utek’s future, there is one part of the company that catches my eye, its “Pharmalicensing” service that allows researchers and pharmaceuticals a platform to search for potential partners.
The service is still in its infancy and has yet to stand out as anything but another expensive consulting firm, but it at least gives microcap investors a reason for another look.
Of course no company can survive without liquidity. That is where Utek investors need to be careful. Shares have pulled out of a long-term nosedive recently as investors confuse this company’s chances of a turnaround with the global economy’s recent uptick.
Right now, the two are far from correlated.
Unless Utek finds some cash, it will be going back to school in the near future. Apparently its leaders failed Finance101.
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