MRV Communications, Is There a Failure to Communicate? (MRVC)

Executives of MRV Communications (OTC: MVRC) must wonder what the company must do to get traders tuned back to the company’s stock. After MRV issued special dividends in November and May, buyers have shown little interest in the stock. Shares now trade for half the price they sold for in May and 60% of their 52-week high set last November. It is as though traders see or hear every headline as static over the last four months.

Yesterday, the company announced its participation in upcoming industry conferences in the months of October and November. Zeev Draer, Vice-President of Strategic Marketing, views the coming presentations as an opportunity to connect with new valuable partnerships. In total, the company will speak before six conferences over the next two months.

Traders welcomed the announcement with a collective yawn. After opening at $0.53, the stock traded in a three-penny range between $0.52 and $0.55. Most of the day’s trading took place during the first full hour of the session. A late surge of buying took the stock into positive territory by the closing bell. MRV Communications shares registered a gain of 2% on the day to close yesterday’a session at $0.54. Even though the stock did not show much trading width during the session, traders did exchange more than twice the volume seen on an average day. Over 260,000 shares traded hands during the session on Wednesday.

Almost 11 months ago, MRV Communications shares traded at an annual high of $1.40 before the payment of the first special dividend in the amount of $0.475. The stock never completely regained its footing before the next special dividend of $0.30 was paid toward the end of May. Over the last four months, share prices have steadily slipped lower. By the middle of August, the stock hit a new 12-month low when shares traded for $0.48.

Even the announcement of a strategic shake-up and second quarter financial results in early August could not shake the doldrums. On August 9, MRV Communications released it findings regarding strategic alternatives. The company concluded to divest its Network Integration business and focus on building the Optical Communications Systems side of the business.

A day later, the company announced second quarter financial results, which showed revenues of $55 million and a net loss of $2.1 million. The report also showed over $43 million of cash on hand. Revenues beat the previous quarter by about $6 million, but fell $4 million shy of the number reported in the second quarter of 2011.

Perhaps some of the pressure on share prices can be attributed to some insider selling. In a Seeking Alpha article on August 22, the author revealed that Glen Tongue, a director, sold 5.8 million shares.

MRV Communications provides optical communications network equipment and services to multinational telecommunications operators, local municipalities, cable operators and high-speed Internet providers. The company currently operates through two business lines: the Network Equipment Group and the Network Integration Group, which it decided in August to divest itself from. The Chatsworth, California, company was founded in 1988.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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