1. In a rather hyped-up press release yesterday, Lumenis (Nasdaq: LUME) announced it would transfer production lines from its Santa Clara, California plant to Yokne’am and Salt Lake City. According to the announcement, Lumenis will therefore lay off 150 employees in Santa Clara, but hire 75 new employees in Yokne’am and Salt Lake City. 30 new employees will immediately be hired in Israel. The total cost of the move will be $7 million, and the company has already reserved $2.8 million for this purpose.
As Lumenis itself admits, part of the announcement was recycled, since it already reported allowances for the transfer of operations. In addition, it is worthwhile paying attention to the differences in the company’s Hebrew press release (sent to the Israeli media) that states it will immediately hire 30 new employees in Israel, and its English announcement (sent to Nasdaq and posted on its website) that merely mentions “recruitment of approximately 75 new employees in Salt Lake City and Israel.”
Furthermore, in the Hebrew announcement, Lumenis CEO Yacha Sutton states, “We consider the present step a continuation of our involvement in and commitment to the Israeli economy.” However, for some reason, this comment was omitted in the Nasdaq announcement, and replaced with: "This streamlining of our worldwide operations will significantly reduce our manufacturing costs and improve profit margins for both the Ophthalmic and Surgical businesses.”
2. Why are the two announcements different? Lumenis is a very delicate situation. The company is facing a severe, almost unprecedented, crisis of confidence, with several lawsuits already filed against it, which will probably take years to settle and cost millions. The share price meanwhile is treading water at around $3.50. While this mainly affects shareholders, it means that the options held by most of the company’s managers are a long way out of the money.
Disappointed US investors will definitely not be pleased to read the Hebrew version of the press release. All investors think a company’s primary commitment is to increase the value of their shares, and only afterwards consider this or that market (Israel in this instance). Israelis think it is important that Lumenis employ as many people as possible here, but what American investor, whose investment is plummeting in value, cares about that? That is apparently why the statement was omitted from the English language press release.
3. Rather surprisingly, Lumenis decided to convene its shareholders meeting, scheduled for August 4 at 4:30 pm, in Yokne’am. To the best of our recollection, this is the first time the company is convening its shareholders, most of whom are American, in Israel.
Why is Lumenis holding the meeting in Yokne’am? Has there been an outbreak of Zionism among its executives and controlling owners (most of whom reside in the US on an almost permanent basis), or is there some other reason? We will note that in 2001, when Lumenis’s share was hot property and hovered in the $20-30 range, the company’s managers refused to dual list in Israel (for which Israeli investors can now only give thanks).
One can only guess that if Lumenis were to hold its shareholders meeting in New York, many of the company’s analysts and shareholders would turn up to express their opinions. It would not be boring. In contrast, things will probably be very boring at the meeting in Israel. After all, how many shareholders can be expected to go to Yokne’am? It goes wthout saying that the company’s overseas shareholders are not happy – to put it mildly – that the meeting has been moved to Israel.
4. What is on the meeting's agenda? Precisely the kind of matters that any American investor who has seen his money vanish before his eyes gets upset about, but which the Israeli investor is perhaps used to. An example is the third item on the agenda: approving the company’s hiring of Thomas G. Hardy, a company director, as a consultant. Hardy is an expensive consultant – how else can one explain his $5,000 a day salary? When the average shareholder looks at the company’s share price, and at the advice that led to it, he gets annoyed.
5. Lumenis has not yet published a profit warning for the second quarter, and we hope it won’t. Readers of Hebrew daily “Ma’ariv” might have noted that Lumenis COO Sagi Genger (the son of controlling shareholder Arie Genger) told an internal executive meeting that the company would meet its second quarter forecasts. There was no denial of the “Ma’ariv” report.
When Sutton was asked why the company published its first quarter profit warning so late (on May 7, over a month after the end of the quarter), he placed most of the blame on the company’s information system, and said that the company was previously unaware of the need for a profit warning. If the the company’s information system was really responsible for the late publication of the profit warning, how come Genger knows that the company will meet its forecasts only four days after the end of the second quarter?
Published by Globes [online] - www.globes.co.il - on July 18, 2002