Hi Elmo...About Morgan Stanley
PMFJI..>>Morgan Stanley is supposed to be a market maker for Novell and be on our side; at least according to Novell.<<
Morgan stanley is not on Novell side at all. In fact, MS has the lowest EPS estimate of $0.60 for FY-97, with the consensus at $0.86. Furthermore, MS analayst does not believe Q4-96 revenues number. In fact, his comments indicate that he thinks Novell is stuffing the channel. Here is what he said:
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11-27-96...One day after Q4-96 announcement
But Phillips, who kept the stock at a neutral
rating, cautioned that Novell has not yet
proven its strength in channel sell-through.
"We remain neutral on the stock since the
question on channel sell-through remains open
simply because of timing," he said. "Investors
are likely to remain cautious on the stock until
the company produces more evidence of
sustained sell-through in the channel."
www5.zdnet.com
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From Post 5475 (Dec.2, 96...few days after Q4-96 announcement)
In the fourth quarter just ended, Novell reported revenue
of $384 million, $17 million above the Morgan
Stanley forecast, Phillips said. IntranetWare and
NetWare 4.0 revenues grew 43 percent to $181 million
during the quarter....
"Anecdotal, but not yet conclusive, evidence suggests
the initial sell-through of IntranetWare in the channel
was encouraging" during the quarter, he said.
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You realize that in Q2-96 they didn't sell any products to the channel and reduced the channel inventory by 200M-225M. In a previous post way upthread, I indicated that these reductions in inventory show that they were stuffing the channel over "say" the last 2 years. This means the revenue numbers we got over the last 2 years didn't represent actual sales to customers. This is becuase these numbers include products which sat on the shelf without being sold (i.e.; increased channel inventory).
During Q3-96 conference call Novell assured the analysts that the Channel inventory remained constant (i.e.; no channel stuffing). During Q4-96 confernce call, one analyst asked about channel inventory and again they assured everyone that there is no channel stuffing. In fact, they said there are about 25,000 resellers and they track them very closely to assure that there is no inventory build-up. They added that the analysts may want to make some phone call themselves to resellers to verify that there is no inventory buid-up.
From the above discussion and MS comments, it is clear to me that some analysts do not believe Q4-96 revenue number and probably think it is higher than the sell-through the channels. IMO, this one of the reason the stock price is stagnant with good Q4-96 results.
Regards
Salah |
