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Technology Stocks : Wind River going up, up, up!
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To: V Lakshman who wrote (6551)10/24/1999 11:20:00 AM
From: Mark Brophy   of 10309
 
I can list other risks, too.

The biggest risk is doing nothing. The market cap is $877m and the book value is $163m, so another year without earnings growth would sink the stock back down to 12. Lower margins would send it down even further.

But, the company won't grow without assuming risk. The great thing is that the new CEO has $2.5m of his own skin in the venture. If it fails, he loses heaps of money just like everyone else. Too many companies give stock options that encourage management to take big imprudent risks. If it pays off, they get a huge bonus. If not, they lose nothing. Jerry Fiddler and the board should be commended for aligning the interests of the CEO more closely with the shareholders than they've done in the past. Let's hope they extend the policy to the rest of the management team.

You might find post 1810 interesting. There has been a 3:2 split since that time, so the company sold convertible bonds when the price was 26 and the former CEO implied that the stock was overpriced. A similar valuation judgement was provided by company co-founder and CTO Wilner at biz.yahoo.com showing his large sales when the price was higher than 26. And the other co-founder, Jerry Fiddler, sold large blocks at similar prices before 1998.

This year's purchases at 14-19 by Elmore and St. Dennis at biz.yahoo.com tell a completely different story. I hope their judgement is as good as past management, but I don't own any Wind River. I only buy a stock when it is clearly and absurdly undervalued. Even if successful, the merger transition will take time and impatient investors might provide a good opportunity.
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