SYX

[David Randolph]

I tried to review the entire thread to see if this has been discussed and I couldn't find anything, but if this is a repeat, I apologize in advance.

http://www.stocklemon.com/10_12_06.html

If you don't have time to read it, the biggest worry would be that their pricing is rebate driven, and it is apparently a pretty big adventure to get the rebate according to many complaints.  The point from SL is that SYX owns the company that provides the rebates.  They also point out that this is a pretty big industry problem, and that some big boys are actually moving away from the rebate game.

I have time to scrutinize the entire article, but please take into account that the article was written in October 12, 2006, and a lot has changed since then.

From Q1 (the quarter StockLemon refers to), Cash levels increased by $21 M and Inventories decreased by $38 M.

I don't see anything strange in SYX owning the company that provides the rebates. Why shouldn't they? As for consumer complaints, they exist in every corporation in the USA, and if you Google every one of them for consumer complaints, you'll probably find thousands for each. Put Wall Mart at the top of the list (in fact, I did find 571,000 hits on a Google search for "wall mart consumer complaints"), and I don't have to say Wall Mart is one of the largest companies in the world with $198 B in market cap.

StockLemon also came up with those consumer reports on IIG, that's his modus operandi.

As for the reporting delays, the company is getting back on track and it promised to deliver 4Q results on schedule. Nothing serious came out of the internal investigation and those auditor's concerns were removed.

That StockLemon's article is talking about the past, those concerns are gone.

What he doesn't talk is: SYX is trading at 0.28 times revenues and 13 times 2006 earnings. That coupled with fantastic growth.

I bought this in the mid 12's, the #'s can't be argued, and Cramer gave it a Bull tonight as well, but I am glad I know some of the potential landmines I had not seen before.  I will probably bail in the low 20's, hoping of course it gets there, not necessarily because of the potential landmines, its just that my piggish ways have cost me in the past.

Yes, thanks for sharing the article, I wasn't aware of it. Call me a pig, but I'm not willing to sell this stock, not at $20, $30 or perhaps even $40 if fundamental trends persist.

[oicpecnoc]

I knew the date of the article, and I am not a big follower of SL, however, if you ask me if I think fundamentally owning the company who does the rebates is a conflict of interest, I would say yes, no matter who is doing it. 

They have the right to do it, all things being equal I would like an independent entity handling my rebate that has nothing to gain or lose from honoring it or denying it.

[David Randolph]

I knew the date of the article, and I am not a big follower of SL, however, if you ask me if I think fundamentally owning the company who does the rebates is a conflict of interest, I would say yes, no matter who is doing it. 

They have the right to do it, all things being equal I would like an independent entity handling my rebate that has nothing to gain or lose from honoring it or denying it.

I don't understand this very well oicpecnoc. The mail in rebate is a promotion they give on the products they sell (I initially thought it had something to do with transportation costs, or a money guarantee). As I see it, it wouldn't make any sense if it were another company doing it for Systemax.

It works like this: for example, www.tigerdirect.com has many Gateway computers in inventory and wants to sell them quickly. So they give a "mail in rebate", which means the costumer can send them back information and documents, and they will send a check to the consumer with the rebate (meaning a promotion), say, $100.

They have very though restrictions on this "mail in rebate", so I understand why there are so many complaints, probably from people that didn't read the Terms & Conditions of the Mail in Rebate.

Check this example:

Click here to download rebate information for:
$50 (USD) Mail In Rebate on the Gateway GT4010 AMD Athlon 64 3500+ 2.2GHz Reburbished Desktop PC - G153-GT4010

But SYX is much more than www.tigerdirect.com, it manufactures computers like Gateway or Dell, for example, check their website:

http://www.systemax.com/

Also, www.tigerdirect.com is responsible for just 34% of total sales of Systemax (of course, its share is growing, and that explains why the company is getting more and more profitable)

Technically SYX went over $20 today, but closed at $19.80, up 4.16% on the day. I'll keep on holding.

[oicpecnoc]

I probably don't understand it either, I just conceptually like the idea of a neutral party processing rebates.  If that is unusual, I think Stocklemon is dubious for criticizing what everyone else does. 

[mbaugh]

Was today's spike caused by the news that options will be trading for the first time on SYX beginning on Jan. 11, 2006?  Would this affect the stock during the short term?  Just curious, I don't do options, never will!

Thanks

Mbaugh

[David Randolph]

I probably don't understand it either, I just conceptually like the idea of a neutral party processing rebates.  If that is unusual, I think Stocklemon is dubious for criticizing what everyone else does. 

The thing is on www.tigerdirect.com a "mail in rebate" means "promotion" or "discount". I would find it strange if it were another company making promotions or discounts on the products SYX is selling.

Was today's spike caused by the news that options will be trading for the first time on SYX beginning on Jan. 11, 2006?  Would this affect the stock during the short term?  Just curious, I don't do options, never will!

Thanks

Mbaugh

Well, maybe some traders think that because of having options a company is more credible or liquid, but I don't think that has any major effect on SYX's share price, not even over the short term.

The thing is SYX is massively undervalued, given its revenue and earnings multiples and the growth it has been showing over the latest few quarters. Why is this? Because the company delayed results due to an internal investigation on internal controls, but that investigation just put in more internal control procedures, but concluded there was nothing wrong within the company.

When hey released Q2 and Q3 numbers (just in the end of November and December, 2006), they were awesome! The stock is responding to fundamental changes, but fundamentals improved a lot more than the current share price implies.

My take is SYX shares need to rise to $32 to be fairly valued by the market with the current public information, not considering its long term potential, which I believe is huge because www.tigerdirect.com sales are growing more than 30% a year, and it is a very profitable sales channel.

SYX closed at $20 a share today. Even though it has been up so much over the short term, I still think the current valuation is an insult.

We're at $20, but I already see $30 on my screen.

[BigSully1]

I have a question about SYX. I always thought tigerdirect.com was a separate company from Systemax, with tiger just acting as a online distributor for SYX. Am I incorrect in that belief? Some of the posts act as if they are one and the same.

I have been aware of numerous complaints in the past years about tigerdirect.com and many other various online electronics sellers. some of the complaints I have heard/read involve rebates, but there were many others such as claiming the item is in stock, billing your credit card and then giving the runaround, sometimes for months as to shipping dates. Others were shipping opened, returned, or refurbished as new and having a lousy return polcy, etc, etc.

Recently though, tigerdirect seems to have a much better reputation. I have many friends who have purchased from them with no problems and a City administrator told me they buy all their computer and products from them now with no problems (I don't know if they are Systemax computers though).

When dealing with an online electronics dealer, here are some suggestions;

1)Make sure the dealer is a manufacturer authorized dealer or the manufacturer rebates and warranties will NOT be honored by the manufacturer.

2) Make sure what you are buying is actually new and whether it is actually in stock.

3) Make sure your credit card will not be billed until product is shipped and that you can easily track the shipment.

4) try calling customer service beforehand, just to see how easily you can connect to them and how responsive they are.

5) Find out what the return policy is.

I intend to build my own next  computer and will probably try buying some, if not most, or all the components from tigerdirect, if they can beat newegg.com's (has excellent reputation) prices by very much.

For pre-built computers, Systemax has good pricing and uses quality components,  but I can't vouch for the quality of the build, tech support, proper burn in, testing, configuring etc.

[eggman11]

Conerning to whole rebate issue.

SYX has their own rebate program, many retailers have their own rebate program. Circuit City one of the largest eletronic store chains in the US. Uses the same rebate strategy. On they're deeply discounted prices they offer 2 rebates. One is a manufacturers rebate and one is a circuit city rebate. I have bought things from Circuit City using their rebates. I did have a problem with them once. Comp USA uses the 2 rebate program as well and I think Best Buy does it too (I have never used it there). Using specific store rebates is a widely used practice in retailing, Its just a way to lure customers in with outrageously low prices and get them in the store or on your website.

[David Randolph]

I have a question about SYX. I always thought tigerdirect.com was a separate company from Systemax, with tiger just acting as a online distributor for SYX. Am I incorrect in that belief? Some of the posts act as if they are one and the same.

tigerdirect.com is owned by Systemax (SYX):

«About TigerDirect, Inc.

TigerDirect, Inc., a subsidiary of Systemax Inc. (NYSE:SYX), is part of an integrated system of branded e-commerce web sites, direct mail catalogs, and relationship marketing companies selling PC hardware, related computer products and industrial products to consumers and businesses in North America and Europe. TigerDirect can be found on the Web at http://www.TigerDirect.com.»

I intend to build my own next  computer and will probably try buying some, if not most, or all the components from tigerdirect, if they can beat newegg.com's (has excellent reputation) prices by very much.

For pre-built computers, Systemax has good pricing and uses quality components,  but I can't vouch for the quality of the build, tech support, proper burn in, testing, configuring etc.

I see you're a computer hardware expert and you're probably going to add to SYX's revenues BigSully1, cool

Conerning to whole rebate issue.

SYX has their own rebate program, many retailers have their own rebate program. Circuit City one of the largest eletronic store chains in the US. Uses the same rebate strategy. On they're deeply discounted prices they offer 2 rebates. One is a manufacturers rebate and one is a circuit city rebate. I have bought things from Circuit City using their rebates. I did have a problem with them once. Comp USA uses the 2 rebate program as well and I think Best Buy does it too (I have never used it there). Using specific store rebates is a widely used practice in retailing, Its just a way to lure customers in with outrageously low prices and get them in the store or on your website.

Thanks for the clarification on rebates eggman11, initially I thought they meant that people paid the transportation of the product but then got a rebate for that value. Instead those rebates are like a delayed promotion.

I've never seen that "mail in rebate" marketing and selling tool here in Europe, but we're always learning from the US, so probably it is just a matter of time.

Anyway, it looks like a common practice, so let's move on.

«Results of Operations

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

Net sales for the nine months ended September 30, 2006 increased 10.7% to $1.7 billion compared to $1.5 billion in the year-ago period. Net sales in the first nine months of 2006 included approximately $583.4 million of internet-related sales, a 30.7% increase from $446.5 million of internet-related sales in the prior year's first nine months.»

So, www.tigerdirect.com now accounts for 34.4% of SYX's total sales, and tigerdirect.com has been growing about 30% a year.

That has been positively affecting profitability:

«Gross profit, which consists of net sales less product cost, shipping, assembly and certain distribution center costs, was $259.6 million compared to $221.6 million in the year-ago nine months, an increase of $38.0 million. The gross profit margin was 15.3% in the current period, compared to 14.5% in the year-ago period. The increase in the gross profit margin resulted from a favorable change in product mix, increased internet sales, increased consideration from vendors and reduced warehouse costs for staff and supplies.»

Technically, slowly, but surely, SIX continues to advance and is now above $20. I'll continue holding SYX.

[thai626]

Gap closed from today's gap up.  This thing is moving up but taking its time.  I may have to put in a stop limit at some point to protect my gains.  Good luck all.

[David Randolph]

Gap closed from today's gap up.  This thing is moving up but taking its time.  I may have to put in a stop limit at some point to protect my gains.  Good luck all.

Good luck to you too thai626

The company released the following news at 14:18 ET:

• That Fish Place/That Pet Place Experiences Immediate Efficiencies With ''Go Live'' of ProfitCenter Software Solution
Business Wire (Tue 2:18pm)

I believe this news is awesome, because it is the first sale of ProfitCenter Software Inc., a wholly owned subsidiary of SYX.

From SYX's latest 10-Q:

«We also participate in the emerging market for on-demand, web-based software applications through the marketing of our PCS Profitability Suite™ of hosted software, which we began during 2004, and in which we have not yet recognized any revenues and have incurred considerable losses to date.»

So, SYX is now a computer maker (Systemax brand), a technology products online retailer (www.tigerdirect.com) and a business software company (ProfitCenter Software).

For as long as the stock is below $30 I don't have much work to do on this thread, because I'm not willing to change my bullish stance on the stock below that level (unless fundamental information changes a lot).

[BigSully1]

Here is Stocklemon's latest report on SYX;

http://www.stocklemon.com/01_16_07.html

It does appear that there are still numerous complaints about tigerdirect and OnRebate. Most are about rebates, but there are also others.

This is a becoming worrisome as Stocklemon is not letting this issue go. I think I will look for an exit, or at least put a stop on.

[eggman11]

Stock lemon only paints the picture they want you to see. Their are rumors that Stock Lemon is not so trust worthy and has other motives, like manipulating the stock price for their own benefit.

Here are other popular retailing review websites they forgot to mention:

http://www.bizrate.com/ratings_guide/cust_reviews__mid--23939.html

Customer Certified 92% rating over 250,000 reviews (Higher Rating than Dell)

http://www.pricegrabber.com/rating_getreview.php/r=500

4.54 overall rating out of 5

As I mentioned in my earlier post their is a lot of retailers that offer and process rebates on the products they sell- i.e. Circuit City and on their filing they do not mention anything about rebates as well. I believe it falls under the Cost of goods sold in the financial report

[oicpecnoc]

I sold at 20.40 today, just in case there is any Stocklemon effect emboldening shorts and prodding profit takers.  It was pretty close to when I was planning on selling anyway.  I might buy it back if it dips, but I won't chase it if I lose out.  The run up and the possible effects of the article combined made me skittish or perhaps a chicken.  With stocks, it seems to me what people percieve is more important than the reality, so even if SL is wrong, it won't matter if people believe it. 

KRY is an example today.  Cramer created a perception that it's risky to do business with a lunatic. as if the guy was sane when he recommended it in the first place. Maybe he is right.  Maybe he is wrong.  It really doesn't matter because the sheep sold and the people afraid of the sheep selling sold based on their perception that the positives of the company could not overcome the fear in the market based on perception.   

Its pretty clear recently that the reality of the cash cow SYX has become is flattening any negative perception.  Lets see if it continues, but sometimes it doesn't hurt to take a time out.

[David Randolph]

You guys are giving me a lot of work here on SYX, which is great

As for StockLemon's article, which I read with great attention, I have the following to show:

- Wall Mart Sucks

- Microsoft Sucks

- NewEgg Sucks!

You can do this for every listed company! (the bigger the company, the more results). The fact is, the company is not working for consumers, it is working for shareholders. If they're able to sometimes rob consumers (in a legal way) for shareholders benefit, shareholders love it ! (IIG is a good example)

One thing for sure – disappointed stockholders will not be able to demand rebates on their share purchases at these lofty levels.

Lofty levels? Since when a company trading at 30% of one year's revenues can be considered lofty? Even more so when that company is a computer maker, an online retailer and a software company?

www.tigerdirect.com is still just 34% of SYX's revenues, and StockLemon confuses tigerdirect.com with the whole Systemax company.

With stocks, it seems to me what people perceive is more important than the reality, so even if SL is wrong, it won't matter if people believe it.

Many people probably believed SL when he wrote his first article on SYX (October 12, 2006), when the stock closed at $11.8. That didn't prevent the following 70% rise. Many people may believe SL's article this time. But that won't prevent another huge bull run on the stock.

Its pretty clear recently that the reality of the cash cow SYX has become is flattening any negative perception.  Lets see if it continues, but sometimes it doesn't hurt to take a time out.

I respect your decision.

I'll continue holding SYX.