BUY Recommendation-MRV Communications

MRV Communications (Pink Sheets-MRVC.pk)
Valuation-$3.09
Price October 7, 2011-$1.27

We are not giving up on our methodology of finding cheap stock that have a catalyst.
MRV has $.94 a share in net cash, 44% gross margins and about $280 million in annual sales.

Their last quarter sales were up 19% from the prior year to about $68 million and they had an operating profit of $3.6 million versus a profit of $1.7 million. They did have a $3.2 million hickey from discontinued operations (2 units that they have sold), that put them into a net reported loss.

On September 1st, 2011, Lloyd Miller and Karen Singer filed a joint 13D disclosing a combined 5.3% ownership interest. On August 8th 2011, another “group filed a 13D with a 8.6% interest. They want MRV to pay out $120 million in a special dividend (about $.75 a share) and get relisted on NASDAQ. Raging Capital also owns 5.8% and is pushing for the special dividend.

We were extremely pleased with another “Singer” investment-Evolving Systems. Telecom seems to be their expertise.

With $150 million in cash (74% of the current market cao) and trading at 41% of our valuation, we think this is a BUY.

Average trading volume is about 300,000 shares a day. There are about 160 million shares outstanding.

MRV Communications, Inc.
MRV Communications, Inc. is a leading global provider of carrier Ethernet, WDM optical transport, infrastructure management equipment and solutions, as well as network integration and managed services. MRV’s solutions enable the delivery and provisioning of next-generation optical transport and carrier Ethernet services over any fiber infrastructure. MRV provides equipment and services worldwide to telecommunications service providers, enterprises, and governments, enabling network evolution and increasing efficiency, while reducing complexity and costs. Through its subsidiaries, MRV operates R&D centers in North America and Europe, along with support centers and sales offices around the world.

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