ALMI,shooting up Tuesday.This is the last report on ALMI.Date: Fri, 02 Jul 1999 11:18:01 -0400
Subject: Alpha Microsystems ($6.50)
Alpha Microsystems appears on track to report somewhat better-than-expected Q2 results. Margins at the company's Information Technology ("IT") services division are improving faster than anticipated. That's mainly because demand has surged for Alpha's upscale professional services group, individuals who resolve tricky network and software issues. Demand remains strong for the company's traditional hardware maintenance services, too, but that group is growing at a more orderly rate.
As a result of the shifting product mix Alpha probably will report a loss of only $.04-$.05 a share in the June quarter, compared to our estimate of $.09 a share.
Improving margins combined with sequential revenue gains that shouyld result from several recently-signed contracts promise to send income into the black in Q3. That now is likely to occur even if the AlphaConnect software line is not sold off in the immediate future. (Our previous estimate had relied upon inyerest income from the sale to swing the bottom into profitable territory.)
We are increasing our valuation of Alpha's base business to $5.00 a share in response to the company's success in expanding its service margins. We still think the "AlphaConnect" internet software technology can fetch $6.00-$9.00 a share if it is sold off, bringing our target price for the stock to $11.00-$14.00 a share.
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