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Technology Stocks : Davox
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To: x70sxn who wrote (391)12/7/1998 8:00:00 PM
From: RBattman  Read Replies (1) of 439
 
Stock is down for a variety of reasons.

1. Sector is down. Market perception is that demand for call centers and call center systems is weak.

2. Answersoft acquisition. Market reacted negatively to the resulting dilution. As of last quarter this acquisition still wasn't accretive to earnings.

3. Lack of recent earnings growth. Over the last two quarters earnings (which had been growing at a 30% clip) slowed considerably. In fact if you look at the last quarter, gross revenue from sales declined year over year. Not good for a growth stock.

First two reasons were primarily responsible for drop from mid $30's to low $20's. The last reason scalded the stock down below $5. Market appears to be taking a wait and see approach to DAVX and the sector. Look at MELI. the only outbound competition this co. has. MELI has the same clean balance sheet, considerable cash reserves, and (unlike DAVX) has continued strong revenue growth (30+%), yet it dropped from 19 to 9 and has only regained to the $14 range. Don't get me wrong MELI has some issues too,(Small float, stock concentration in one individual and too much management control in one person's hands), but if MELI isn't moving up then DAVX is going to remain range bound til its performance picks up. Particularly until we see something out of Answersoft.

Sure would be nice to see the Board vote to buy back some shares. If Answersoft was a good deal for 2mm shares of DAVX stock back when it was trading around $30, then why not buy back 2mm shares for $6 - $7. Just like getting Answersoft for $12 to $14mm instead of $60mm.
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