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Technology Stocks : ADSP - Ariel

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To: Pluvia who wrote (1967)	11/29/1999 10:05:00 AM
From: Hockeyfan	Read Replies (1) of 2263

JG Kinnard: ADSP - Lowering rating to SELL 09:33am EST 29-Nov-99 John G. Kinnard & Co. Inc. (Mike Latimore 612-370-2721) UPDATE 11/29/99 John G. Kinnard & Co. EQUITY RESEARCH * Selected excerpts * Ariel Corporation (ADSP - $37) Rating: SELL LOWERING RATING TO SELL - MISINFORMATION IN MARKET Two-Week Price Target: $4 ESTIMATE CHANGES 4Q99 EPS: Lowering revenue to $3.3 million from $4.3 million; same EPS 2000 EPS: Increasing to ($0.81) from ($0.97); same revenue estimate KEY POINTS Lowering rating to SELL from NEUTRAL on excessive and unwarranted run-up in stock. Ariel is trading at an 1100% premium to comparables despite less revenue visibility, delays in new channel development, an arguably tougher market focus, a unproven track record and a precarious cash position. DAYTRADERS' FEEDING FRENZY OVER THANKSGIVING We see no change in Ariel's prospects relative to last week or a month ago. In our opinion the recent run-up in the stock relates to a misunderstanding of Ariel's market position by daytraders focused on buzz words. Ariel's association with hot topics such as Linux, remote access, international communications and Internet service providers (ISP) has created a fervor in the market leading to an excessive valuation in our opinion. One news article went so far as to categorize Ariel as a wireless equipment manufacturer. While Ariel does have a relationship with AT&T to supply remote access servers on planes, Ariel is not per se a wireless equipment vendor. The only news item that came out last week relevant to Ariel was what should have been an innocuous press release discussing international certification in a few countries for its products. While effort is certainly required for such certifications, they are par for the course for communications component suppliers and telecom equipment companies in general.

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