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NETRO CORPORATION
(Name of Registrant as Specified in its Charter)
C. ROBERT COATES
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4) Date Filed: May 20, 2002
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COATES AND KENNEDY'S KEY POINTS ON MAXIMIZING THE VALUE OF NETRO CORPORATION
MISSION: Serve the shareholders. Maximize the value of shares. Improve
corporate governance.
We believe that Netro's shares can sell for at least today's cash value. We
also believe that Netro's shares can potentially be worth far more if the
company can be effectively managed as an independent entity.
Here are a number of actions that we think Netro's management and directors
can take in the coming months to better serve all shareholders:
* Provide for better disclosure of information to shareholders.
* Stop the repricing of options.
* Establish a nominating committee for the board of directors. Solicit
input from shareholders on nominations.
* Review and revise other corporate governance provisions to bring them
into line with current standards recommended by the NACD, CalPERS, and
ISS.
* Buy back shares to offset dilution. Shares outstanding have increased
from approximately 52.5 million at the end of 2001 to 60.9 million
today. In addition, there are substantial options that have been
issued at prices close to the trading range of this stock.
* Buy back shares to increase the value of stock. Shares trade at a
very deep discount to cash. The cash and marketable securities per
share, although it has fallen substantially, was approximately $5.17
on March 31, 2002. Netro stock closed at $2.64 on May 17, 2002.
Buying cash for 50 to 60 cents on the dollar is a very high return,
low risk investment strategy, especially given the depths of the
depression in the telecom business.
* Reduce costs. Costs have soared even while sales have declined
precipitously and cash burn rates have therefore increased
dramatically. Costs can be reduced substantially without reducing the
effectiveness of the company.
* Consider replacing Arthur Andersen over a well-defined transition
period.
* Partner with a large Chinese company. The market in China may have the
greatest near term potential and Netro competitors have already
announced partnerships. At the same time, Netro should address the
needs of its important customers in Latin America and Europe and
provide excellent engineering support to its installed base.
* Find a new OEM to replace the lost Lucent OEM relationship. Netro's
attempt to grow its own sales force comes too late and costs too much.
Moreover, it burdens Netro with large costs that are not tied directly
to revenues.
* Acquire or invest in smaller wireless technology companies. Technology
is changing very rapidly in this area and the only way to stay current
is to avoid a not invented here mentality.
* Find some way to use the very large net operating loss carryforward of
$173,000,000. This NOL has a potential value of 55-65 million dollars
in terms of reducing taxes but Netro must probably remain an
independent entity for this to be the case.
* Replace the top talent that has left the company since 1998. Netro has
lost it top two technology people who developed their primary product.
They have lost the top two executives who formed and cultivated the
relationship with Lucent that at one time accounted for 80% of their
sales. They have lost the CFO who took them public and saw the
company's sales and stock price surge higher.
* Hold management accountable for meeting realistic goals and budgets.
Do the same for directors.