As ShoreTel, Inc. (NASDAQ:SHOR) members of the management appeared to be leaving the boat one after the other, the recent announcements of revenues higher than the forecasts sounded kind of weird, even more weird was investor initial delight. And although the PR continues, yesterday some common sense established on the market.It seems that a lot of market participants holding shares of ShoreTel were not eager to hold them any longer yesterday. A huge selling out volume of more than 830,000 shares drove the stock price down by 7.85% so that the market closed at $4.93 for a share. Such trading activity for the stock has been seen only a couple of times for the past two years, suggesting a key moment for SHOR, which might soon determine the future direction of move.
The last two days brought one press release each, announcing the availability of ShoreTel Online TCO Tool and the release of ShoreTel Contact Center 6. Though, investors could not take much of comfort of such updates.
It seems the market is still attempting to assimilate some previous PR activity by the company, especially when taking the latest financial results into the account. Last Wednesday, ShoreTel’s CEO announced that fourth-quarter revenues are expected to be higher than the earlier forecast, and declared his resignation at the same time. Strangely, it followed the resignation of the Vice President of Global Services of the company, announced at the end of last month.
Now, investors have to find out why could the two be leaving the boat if the business is doing so well. The more revenues promised is not always such a good thing, and especially in the case of ShoreTel, it is not clear what they could contribute for.
The company’s sales were actually growing over the past year, but it seems there is a problem with the way there are being made. The low production costs can obviously not help ShoreTel get profitable, as the operating loss was in the last quarter 73% higher than previously. The selling and the administration appear to be highly costly, taking more than twice the money spent on research and development. It seems hard to survive in the innovations-intensive IP telecommunications market with such parameters.
