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Technology Stocks : Novell (NOVL) dirt cheap, good buy?
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To: ToySoldier who wrote (21328)3/22/1998 1:32:00 AM
From: Don Earl  Read Replies (1) of 42771
 
Hi Toy Soldier,

I don't think there is any way to guesstimate how much would be involved. The potential impact on the stock price isn't about possible pay outs years in the future. It's about a possibility (near certainty) that there will be a SEC audit of the books. If the allegations are true and Novell misrepresented earnings and revenue, they would be forced to restate the true figures. If revenue has been as bad as the allegations suggest and if recent quarters have also been misrepresented, the stock will go straight into the toilet.

What if actual revenue was closer to $225 million with a loss of .10 instead of a "surprise" of .04 to the good? Take a look at an IFMX or SIII chart if you'd like to get an idea what happens to the stock price if the numbers that folks have been betting the farm on are wrong.

There have been 8 press releases on the suit since it was first announced. Does it sound like they are just playing around? Consider also the impression the news will leave on potential customers that are trying to decide what company to go with on their networks. The suit has the potential to affect future earnings as well as past earnings. If they do have to restate, the PR will be that much worse.

For all we know, there could be federal auditors going over the books as we speak.

Talking about how much money might be involved is a red herring. The real question is: Can Novell stand an audit and are the allegations true?

Anyone that has done their homework already has a pretty good idea what the answer is likely to be.

Regards,

Don
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