Hmmm....

Peter Altschul

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>Date: Fri, 14 May 1999 19:06:47 -0700 (PDT)
>From: Roger Petersen <[log in to unmask]>
>To: [log in to unmask]
>cc: VIDPI Listserv <[log in to unmask]>
>Subject: What ever happened to TeleSensory?
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>
>+== acb-l Message from Roger Petersen <[log in to unmask]> ==+
>If you are wondering about this subject, here is a minority stockholder
>view that was expressed at the recent stockholders meeting, yesterday.
>
>    Telesensory Annual Meeting of Shareholders
>
>May 12, 1999
>
>This is an alternative Shareholder Viewpoint to the
>official management position.  I will present a brief
>history of the companies past few years performance,
>starting in 1996.
>
>We will also attempt to crawl through the wreckage of the
>1998 annual report.
>
>The 1996 annual report states the following:  " Although
>our unsuccessful IPO was a major disappointment and a
>major distraction, there were many compensations ". The
>statement goes on to say there was "continued growth,
>sustained profitability, the successful introduction of
>many new products, and the establishment of a new
>division whose initial activities augur well for a
>successful future".
>
>The report claims operating income was up 20.7%.  In
>reality, when you examine the footnote you realize that
>a charge of $690,000 due to the failed IPO  is not
>included in this figure and this results in operating
>income being down by almost 10% compared to the previous
>year.   Six Hundred and Ninety Thousand Dollars- Wasted!!
>
>While the company did indeed earn a profit in 1996 the
>abortive IPO set the stage for a downturn in business
>from which the company has yet to recover.
>
>In that same report Telesensory's President, Chairman and
>CEO wrote the following: " The Board of Directors
>continues to recognize that shareholders have a
>legitimate interest in liquidity for their investments.
>While it is not possible to provide a specific path or
>timetable for achieving this, the Board wishes to
>communicate and reinforce its recognition of liquidity as
>an appropriate goal for those who have invested in
>Telesensory."
>
>As you all know there was no liquidity in 1996.
>
>Remarkably almost the exact same statement appears again
>a year later in the 1997 Annual report.  Again, there was
>no timetable or schedule for achieving this very
>important goal.  Why not?
>
>As you all know there was no liquidity in 1997.
>
>Remember the statement in the 1996 report about the
>establishment of a new division?  That was called VTEK.
>About 18 months later the company decided to divest
>itself of that division which had piled up unacceptable
>operating losses and has yet to see any profit.  Another
>management decision and  investment  that proved to be a
>failure.
>
>In discussing new product development of the now defunct
>Blindness Products Division,  the 1996 report stated:
>"We expect to realize growing revenue contributions from
>this division in 1997, including Domino and Marco, two of
>the divisions exciting new products".    Fast forward one
>year to the 1997 report; it states: "we have discontinued
>efforts to develop the Domino".  No one is quite sure
>what happened to that other "exciting" new product called
>Marco!
>
>In fact, neither of those products ever saw the light of
>day.  They provided a negative return on investment, and
>as you know the Blindness division was later sold,  after
>piling up significant losses under the management of Mr.
>Soloveychik.  For reference, the Blindness division was
>the cornerstone on which the company was founded and was
>a growing and profitable operation prior to the arrival
>of Mr. Israel and Mr.  Soloveychik.
>
>In 1997 the company prepared a mission statement.  One of
>the 3 key points was "to provide a fair and reasonable
>return to our shareholders".  Another key point was:  "To
>provide a company culture and environment where our
>employees have opportunities for personal development and
>recognition for their efforts"
>
>As you know, there has been no fair or reasonable return
>to shareholders, and in 1998, three senior managers  (
>two of whom were also officers of the company) chose to
>resign due primarily to a frustrating working
>environment.  This is a troubling and disconcerting
>trend.  In fact during the 5 years of Mr. Israel's
>tenure there have been 4 different CFO's and 4 different
>Vice Presidents of Marketing.  This would be a disaster
>in most companies and I believe is reflected in the
>companies poor performance.
>
>Why has the turnover been so high among key officers at
>TSC?  I believe Mr. Israel must take responsibility for
>that.
>
>In 1997 the company  projected it would achieve revenue
>of $43.5M and earnings before taxes of $3.5M.  It also
>promised 20% annual growth.
>
>Not one of those goals was met .not one!
>
>In fact, revenue in 1997 was down 1% and both operating
>and net income were down 86% and 97% respectively.  Net
>income per share was a meager 2%. The 1997 results were
>so far off plan that we as shareholders should be asking
>why?  Can the current management be trusted to provide
>reliable forecasts of future performance?  Past history
>suggests that they cannot!
>
>There were of course lots of excuses for this poor
>performance.  The 1997 report says:  "1997 was a
>disappointing year".  Yes it was.
>
>Also in 1997 senior management  talked about company
>culture and goals by saying:
>
>"The Plan, and our activities to implement it must be
>SMART   Specific, measurable, achievable, realistic, and
>timed".  Apparently this does not apply to what is
>perhaps the most important issue for you as a shareholder
>liquidity;  since we have been told repeatedly that "it
>is not possible to attach a specific schedule to that
>goal".
>
>It was also said:   "There will be accountability".  Yet,
>there appears to be no accountability at the highest
>levels of management associated with product failures,
>new divisions that fail, acquisitions that are fraught
>with problems, and the inability to meet any of the
>companies financial goals.  Perhaps accountability does
>not apply to the President, CEO and chairman.  Are we to
>remain insulated from the mainstream of corporate America
>where accountability is not only a necessity, but
>mandatory?  Without accountability, we shareholders
>become victims of management's poor performance.
>
>Let me continue.
>
>At the end of 1997 the company announced with much
>fanfare the acquisition of Xerox Adaptive Products.  The
>1997 annual report refers to  the acquisition of "the
>strong line of OCR  reading machines and software TSC
>acquired as part of the XAP acquisition". As I stated
>before, this provided a convenient excuse to discontinue
>development of a number of blindness products that were
>failures and cost the company hundreds of thousands of
>dollars in development costs.  No one was held
>accountable!  It also set the stage to sell off this once
>profitable division.  Instead of being held accountable
>for the product failures and the divisions poor
>performance, Mr. Soloveychik, who was the GM of the
>Blindness division and managed it into oblivion,  was
>rewarded for his poor performance,  by being promoted to
>Senior Vice President.  Amazing!!
>
>Less then 6 months later, in June 1998 the Xerox facility
>acquired in the XAP acquisition was closed and the entire
>staff, including some very talented engineering and
>marketing personnel were let go.  The second quarter
>report (7/28/98) referred to this with the following
>statement:  "At the time we acquired this activity from
>Xerox we believed that continuing to operate that
>facility in Peabody could and would constitute a vital
>and important part of our operations.  However it proved
>impossible to realize the sales levels that had been
>forecast by former management of that operation or to
>effectively manage the operation from the West Coast and
>stem continuing losses there."
>
>I have a difficult time understanding this logic.
>
>Telesensory acquired a company, paid approximately $4 M
>in stock for it, and within 6 months closes the facility,
>fires the staff, and then blames it on the former
>management.  How convenient.   Did anyone bother to check
>the sales forecast against the realities of the
>marketplace.?  Was there no due diligence that should
>have revealed this?  The 3rd Quarter report (10/14/98)
>reveals more about the problems associated with this
>acquisition.  It says:  "In early 1998, a series of
>serious technical problems (design flaws) surfaced in the
>product, necessitating a cessation of shipments, a major
>redesign of the product, and the need for a 100% product
>recall to fix the problems."
>
>I'm confused.  Just six months earlier (4/6/98) the 1997
>annual report refers to this same product as a "strong
>line of OCR reading machines and software".
>
>Was there no due diligence associated with this
>acquisition?  Had there been, the management would have
>known of the serious design flaws and should have either
>canceled or delayed the acquisition, or at least delayed
>the product introduction.  That did not happen.
>
>The 1998 annual report now sheds further light on the
>Xerox acquisition.  I quote:  "In last years annual
>report, we said that the acquisition would certainly be
>a major factor for the company's growth in  future years.
>We were wrong. The acquisition of API has been extremely
>damaging to Telesensory".  End quote.  The fact is, it
>was and is an unmitigated disaster.
>
>So,  here we are again with yet another bad management
>decision costing the company dearly and ruining what
>should have been a profitable year.  Yet again there is
>still no accountability. The people running the company
>are still in place.  Why??
>
>The report suggests it is Xerox who is at fault, for
>concealing or failing to disclose significant
>information.  Well, isn't that what due diligence is all
>about?  It is not Xerox who is at fault.  They did not
>force TSC to buy this money losing division; a division
>that Xerox had been trying to dump for many years.  The
>fault lies with Mr. Israel,  who failed to do his job in
>determining the facts, and evaluating the risks.  He
>forged ahead with the Xerox deal even though he did not
>have all the facts, and was willing to bet the company by
>the issuance of additional shares of stock. So what does
>TSC have to show for this?  Huge losses in 1998 effecting
>operating and net income, and net income per share.  The
>cost is also reflected in the enormous waste of time by
>employees and sales people that should have been spent
>focusing on the core business.  Whose fault is that?
>The 3rd quarter report  stated  that TSC filed a formal
>arbitration demand against Xerox and that Xerox in turn
>has filed a separate arbitration demand against TSC.
>This is coming from a company that states on its
>letterhead that it is a Xerox strategic partner.  What
>does that mean?  Why would strategic partners file
>arbitration demands against each other?   The Xerox
>acquisition was another bad decision costing the company
>time and money with no appreciable return.  This time
>there is no one else to blame.   This arbitration
>continues to drain the companies limited resources.
>Remarkably, as if 2 costly and time consuming
>arbitration's were not enough the annual report states
>that yet a 3rd arbitration will be filed against Xerox.
>This is amazing.  I thought TSC's business was low
>vision, yet it appears instead to be arbitration.
>
>The report closes with another remarkable statement:  "We
>can now, for the first time in many years, clearly
>describe who we are and what we do".  What is going on?
>The current management has claimed to be a professionally
>managed company, but   doesn't know who it  is or what it
>does?
>
>
>Ladies and gentleman, what you have here is a pattern
>over the last 3 years of poor management decisions,
>broken promises, non performance, and a failure to
>achieve any of the significant financial goals that the
>current management has repeatedly promised you.
>
>Their ability to effectively manage the company is in
>serious doubt judging by the disaster  called the Xerox
>acquisition. You have been promised liquidity for your
>investment and growth in revenue and profits.  The
>current CEO  has failed to deliver on even one
>significant promise over the past 3 years.  What is the
>Board of Directors going to do,  to correct the problems
>and implement a cure?   And, what is the timetable?  This
>poor performance  should not be rewarded and  senior
>management must be held accountable.
>
>Would anyone on the board be willing to respond to my
>statements today?  It would be most helpful for all
>shareholders.
>
>
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>* of the American Council of the Blind.                    *
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