Leo, the price of a stock has to do with potential fundamentals
not current fundamentals. A barometer versus a thermometer. It's
that simple. That's why the market, or a stock, usually peaks out
while the economy, or a company, is still prosperous. As an example,
Netscape's past $80 peak did not reflect is current revenues,
profit, book value, or booked orders. It reflected its future
prospects. Knowing that Microsoft was going to compete with a
vengeance, made Netscape's $80 price unrealistic, resulting
ultimately in its current price.
As far as why Netscape's management is being silent about how they
will increase revenues and return to profitability, my guess is
they're playing it close to the vest. They're going through a period
of creative destruction and at this point it looks as though they
have decided not to let Microsoft do to them what it did to
WordPerfect and Lotus' 123. Microsoft does not innovate, it embraces
then extends its own products. I believe giving the code away to
developers is saying to Microsoft "Embrace this"! In effect Microsoft
will be playing catch up to innovations in Netscape's browser produced
by internet developers.
Up to this point you have been correct to short Netscape! What I
would suggest you watch for, beyond the obvious price rise on heavy
volume, is: (1) netscape's stock trades up after 2:00pm for a few
days - that's smart money buying and/or shorts covering, (2) the low
of 14.875 does not get confirmed. That one-day price reversal served
silent notice that not everyone believes Netscape's days are numbered. |
