For NETA to go up to $90, which is where we thought it would be by now when we analyzed it at the beginning of the year, it will take:
1) re-gaining the perception of being a category killer. So far this year, NETA has not been killing CHKP or ISSX. For people to have confidence in this stock, they need to see NETA winning at CHKP and ISSX's expense.
2) re-gaining the perception of being a lean, financially-disciplined company. It used to be perceived this way, but obviously not since January of this year. What would I look for? DSO's back down below 60 days. G&A down below 7%, R&D slowly growing, net margins in the low 40%'s.
3) Many agreements in place to have partners like Cisco use the products, or manage to the products' standards, or stuff like that.
4) Profits at $1.80/share or more.
5) Revenue run rate of $250m/quarter before year's end, and over $300m/q into Q1/00.
6) New product announcements that create new categories, rather than just new versions or "internet enabled versions" of existing products.
I think Larson has the right idea with NetTools, but his R&D teams need to more clearly kill the competition with the products. It wouldn't hurt to put in place an overlying management scheme that would do for security and network analysis what Tivoli or Unicenter have done for sysadmin.
In closing, I think this company has what it takes, but the team has been wounded, and only they themselves can pick themselves up off the ground and begin to fight again.
Many mis-steps have brought the company to where it is now. But, it is on familiar fighting turf -- come from behind and simply out-execute and out-sell the competition. But it is all for nothing if Larson, Watkins, and Nelson don't get up and start fighting.
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