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Carl, This note is going to sound like I think Intel is the boogey
man of all time, and, I do, sort of. They are going to put the
functionality of the modem on their mpcs, and at that time, what is
left for modem makers? I don't know if it will work, but betting
against Intel technology is not a great bet, longer term. C-Cube won
my hubris award last year. When the stock was over 70, the CEO
appeared on CNBC and said that growth was assured and that they had
no competition. I bought puts. I hate hubris, other than my own.
-G- Within 2 weeks, IBM started cutting into the low end of Cube's
business. Within 6 weeks, Intel went after the high end. Within 12
weeks, the stock was down 65 percent. Basically, this is a fine
company that simply got way overpriced. They will be able to compete
with IBM and Intel, but, more and more, they will have to compete on
price with two huge predators. I think they will survive, but their
margins will shrink enormously. So, at 20 times eps, it is approaching
fair value, but it is also possible that a lot of starry-eyed bulls
are unaware of the new business conditions. I still hold a 1/3 put
position just in case they get the news a bit late. MB |
