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Strategies & Market Trends : Value Investing

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To: Wallace Rivers who wrote (7851)	7/25/1999 4:51:00 PM
From: jeffbas	Read Replies (3) of 78843

On MAXS, I was afraid you would say that. Using round numbers, the gross margin is about 30% and 25% of sales is about $10 million per quarter. UNLESS THE NINEWEST BUSINESS WAS MUCH LESS PROFITABLE THAN AVERAGE, a loss of 25% of sales will reduce gross margin and pretax income by about $3 million per quarter, NEARLY WIPING OUT EARNINGS! It is reasonable to expect that the gross margin on this business might be less than average to the extent of license payments, but I am not sure. If I am right to what extent do people think this is in the price and to what extent are we gambling that the sales can be replaced.?

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