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Technology Stocks : SFNB, Security First Net. Bank
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To: jc who wrote (150)5/8/1997 9:43:00 AM
From: Brian K Crawford   of 507
 
jc, SFNB's financials do look horrible.

The press release recaps the already released earnings for the March quarter, but then adds news about more banks signing on to the S-1 solution.

Then comes a bomb: Management is surprised by the number of institutions opting to use the S-1 data center instead of purchasing the S-1 system and operating their own data center. That means upfront revenues are lower, and the revenues will come in over time. And S-1 will have to add staff and gear up to handle the increased volume. So long term good news is short term earnings bad news.

Bomb # 2: " While financial institutions continue to be attracted to the benefits of the S1 solution, the process of integrating the software with the financial institutions' legacy mainframe systems is more complex than originally expected and has resulted in delays in bringing banks online. The Company's current customers require a number of operational enhancements to the software which are presently under development and will be implemented over the course
of the year. This six- to nine-month delay will result in similar delays in
the revenues from both software licensing and data center operations."

You shouldn't own SFNB for the banking prospects. It's going slower than expected for new account signup and activation, so they are having to build brick and mortar branches to round out the service offering. They will survive, but don't have any particular advantage over any other online offering, and have some weaknesses against online banks with branches.

The software sales and service center side of the business is very intriguing, but must be considered a startup, in-process endeavor. And a high risk one. The latest news will not add any momentum to the stock price. Your floor for the short term is around $4.50 - $5.00 per share, based on its book value.

Good luck,

Brian
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