Should ChinaCache Internatnl Hldgs Ltd (ADR) (NASDAQ: CCIH)’s Shareholders Be In Panic Mode?

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ChinaCache Internatnl Hldgs Ltd (ADR) (NASDAQ: CCIH) blamed delays in the optimization of a platform it calls HPCC for the massive pullback in 1Q2016 revenue compared to a year ago. The platform was launched around mid-2015 and the process of optimizing it has seemed slower than the management expected. According to CEO, Song Wang, despite delays in bringing HPCC to optimal performance, it remains their bet for long-term competitive advantage.

Why bring up HPCC if it’s causing problems?

First, ChinaCache Internatnl Hldgs Ltd (ADR) (NASDAQ: CCIH) didn’t anticipate that HPCC would prove to be a challenge as it has been. However, the idea of bringing up was to ensure that the company can cope with increasing traffic and deliver the best services to its customers without issues. Something that investors should cheer about is that the management has faith that HPCC will pave the way for the company to get back to topline growth as early as 2H2016. Moreover, CEO Wang talked about the opportunity to improve internal efficiency once HPCC is up and running optimally.

ChinaCache Internatnl Hldgs Ltd (ADR) (NASDAQ: CCIH) banking on experience

To drive future growth, ChinaCache Internatnl Hldgs Ltd (ADR) (NASDAQ: CCIH) is also banking on its more than 15 years of experience beyond the massive support expected from HPCC.

According to CEO Wang, ChinaCache is betting on China’s rapidly expanding Internet industry and they believe they have what it takes to take advantage of the opportunities as they come.

1Q2016 in numbers

However, for 1Q2016, ChinaCache Internatnl Hldgs Ltd (ADR) (NASDAQ: CCIH) caused stomach discomfort in the market. The company generated revenue of $41.5 million, which was down 14% YoY, a development blamed on the HPCC platform already discussed. Coming to the bottom-line, the company logged an adjusted net loss of $13.6 million, a massive pullback from a net profit in the same quarter last year. EPS loss of was reported at $0.55 for the latest quarter.

ChinaCache Internatnl Hldgs Ltd (ADR) (NASDAQ: CCIH) finished 1Q2016 with cash and equivalents of $64 million, lower than in the prior quarter. The company funneled $4.9 million to capex in the latest quarter.

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