Indeed, Kirce.
Ford Motor Company is under tremendous pressure to improve its bottom line. Ford owns a number of companies, ie. Budget, Hertz,
Associates, and others. If these companies were valued seperately, they would be worth around $34 a share in Ford common stock. However, Ford trades at around $32 per share. This makes the automotive business of Ford worth about -2$ per share. NOT TOO GOOD. The same
can be said for General Motors.
Last year GM launched a worldwide diagnostic tool for their worldwide dealerships that sells for around $1,000. Ford already has a comporable diagnostic tool (NGS), which sells for around $800. This tool is manufactured by Hickok (bidding on the WDS against Genrad). I understand that Hickok's proposal is for some sort of NGS-II model.
Since there are over 8,500 NGS units in North America, approx. 600 in Latin America, 750 in Asia, 150 in Africa, and 4,000 at Mazda dealerships (over 14,000 worldwide), I would think that they have a pretty darn good chance of winning the WDS contract - if one is ever awarded.
Ford is cutting costs right and left. Staff is being seriously reduced, travel expenses decreased, overtime cut or eliminated or required to be workded for free, management staff reduced, units being sold (heavy truck recently sold), and decreased merit increases.
I would not expect that Ford would want to pay a lot of money for a diganostic tool where there already are a whole lot of diagnostic tools.
For example, FDS-2000 (Genrad's tool in Europe) has just recently been launched in Europe (last few years) and it is still being sold to dealerships. The hardware still has a lot of life expectancy left in it, so why would Ford want to replace it with another diagnostic tool? Better question, after paying somewhere around $10,000 per unit, why would Ford's European dealerships want to buy another diagnostic tool that may be no better than the diagnostic tool they already own? Other examples could also be made.
Since Hewlett-Packard is also bidding on this tool, and they have a worldwide presence, in my opinion, they would have to be considered a good candidate to win the WDS contract.
But who knows, anything could happen. And for that reason, I would have to say that investing in Genrad, even at $13 per share would be highly speculative. Genrad's 12 month price target could easily be below $10 per share.
Look what happened to CAI Wireless. They were a speculative stock that ended up on the losing end, even though they had a multi-million dollar contract with Bell-Atlantic/NYNEX and their stock ended up dropping from $15 per share to below $1 per share before settling into the $2.25 per share range.
All I can say is "Buyer Beware" and or "Rewards go to those that Risk the Most".
Later.
P.S. I do not think there is any stock manipulation going on, unless of course the company is sharing infor with market makers that is not filtering down to us little guys. |
