Dom,
If you are a buy and hold fellow you have come to the right place. I have to admit that I wouldn't know an inverted candle if it was burning the place down.
I am also not an networking engineer. I run and occasionally buy companies so I am somewhat bound to fundamental analysis from the financial perspective.
Now to the point. As technical companies go, Fore is a pretty good one. By their management's own admission don't expect anything earth shaking within the next two quarters. They are building a plant in Ireland which will lower costs slightly as well as give them a tax rate improvement.
They are in my opinion moving out of the mindset that product is everything to a more marketing oriented approach. This is not to say that the product lacking, quite the contrary, but to run with the big boys like Cisco Fore realized they are going to have to get a little more agressive. Give it a couple quarters to start kicking into the earnings.
The company is essentially debt free which might in some circumstances make it a good target for a takeover friendly or otherwise since the leverage and financing would be available to make it an attainable acquisition for many otherwise less than rich suitors. However, management holds a significant portion of the stock and is integral to the running of the company. Unless an approaching party offers an unbelievable price and conditions a takeover is unlikely.
On the otherhand if a Lucent or Bell Atlantic came with a viable long term strategic alliance tied to a stock swap and continued autonomy for Fore it could happen. But certainly not at a price like todays.
No one is going to pick up this stock cheap except us.
Earning growth for the entire networking industry has slowed considerably. Using earnings growth as a realistic multiple of earning to obtain a price, Fore is not going to be a $40 stock anytime very soon. At the prices of last week the stock is fairly priced, which means by tech standards inexpensive. Investing at todays prices is buying into a well run company, in a growing market, with good product during a period of uncertainty. Sometime during the next two years it will again be cloaked in euphoria, momentum players will be back and Fore will again be unfairly priced but on the upside. Have patience and you won't go wrong. And if the perennial takeover rumor does come to pass so much the better.
mt |
