Although Rakon's ''look through'' operating earnings of $5.1 million was in line with guidance, it was a poor quality delivery.
The reported loss of $15.5 million (before asset write-downs) and actual earnings of $1.3 million for the full 2013 year were worse than expected, he said.
''On current outlook, operating cash flows will remain negative in 2014. Our concern is the lack of new flow on the balance sheet restructuring. The debt level, in our view, is unsustainable. The plan will now be revealed in July.''
Craigs maintained its sell rating on Rakon shares until the capital structure was addressed and earnings visibility improved, Mr Timms said.
At balance date, Rakon's net debt was $33.1 million. Craigs was forecasting net debt would escalate 40% to $46 million in the current 2014 financial year.
Also, the Chengdu plant needed further investment to realise its cost-saving potential, he said.
Management noted it had set an objective to reduce gross debt below $15 million by the end of 2014 through working capital and structural realignment.
''Without any plans of capital-raising, we will be interested to know how this will be achieved,'' Mr Timms said.
Milford Asset Management senior analyst Brooke Bone said he found the contrast between the Xero and Rakon results ''fascinating''.
While obviously very different companies in that one manufactured a product that was sold into the tech industry (Rakon) and the other had created an online accounting system that was growing rapidly, both were considered ''tech companies''.
There were also some similarities in both results with Xero growing customers by 101% during full-year 2013, while Rakon grew smart wireless device (SWD) volumes by 85% and now supplied five of the top seven tier 1 global smartphone brands, he said.
''So why is one valued at $1.62 billion with a $13.84 share price and $78 million cash on the balance sheet [Xero] and the other valued at $40.1 million, with a 21c share price and $33.1 million of debt on its balance sheet [Rakon]?
''One could easily point out the demise of the Rakon share price, which peaked at $5.50 in 2007, as a salutary warning for those current investors in Xero.''
Rakon had suffered from investing heavily in new capacity and chasing a large and fast-growing market, which only served a few key customers and was open to fierce competitor price activity, Mr Bone said.
The result had seen price and gross margin falls causing operating losses. A path out of Rakon's predicament was not obvious, although it's net tangible assets would give it some support.
Xero was in the ''sweet spot'' of growth companies. Growth was from a low base and new markets were beginning to open. The company was riding the crest of the wave of Software-as-a-Service company valuations, he said.
''Should investors run as they have from Rakon? We would suggest looking at how profitable both Trade Me and Diligent, along with Google and Apple, have become to see just how much money a tech company can make once it has scale for its model and can maintain or dictate pricing,'' he said.
