Not much to report on the mm activity the last few days. TUCK is not playing. NEED is playing very little. SNDV is calling the shots. Every time the stock starts acting like it wants to get going, they come on the offer and stop it dead in its tracks. My read is that they are still accumulating stock for their clients.
When it becomes obvious (after XICO releases Q4 income before restructuring charges of $0.08 - $0.10) that SNDV's $0.11 for Q1 is too low, they (SNDV) will have to raise their Q1 and FY 2000 earnings or look stupid. I expect them to revise their estimates upward, possibly raise their price target and possibly go to strong buy after the Q4 results are released in January. If any of the above happens, the stock should easily blow through $20.
For those that can't see why it will be obvious that SNDV's $0.11 for Q1 2000 is low, if I am right and XICO reports Q4 income before restructuring charges of $0.08 - $0.10, let me explain.
1) The operating results for Q4, will be encumbered with the inefficiencies from Milpitas, as the Company has not announced a formal restructuring plan and therefore, can't report the Q4 operations assuming the restructuring charge was done October 1.
2) I estimate that the inefficiencies from Milpitas could be as high as $0.10 per quarter. That being the case, if Q4 (which includes the inefficiencies) is $0.08, then without any growth at all, Q1 2000 (which will not include the inefficiencies) would be $0.18.
3) If for some reason they did report Q4 without the Milpitas inefficiencies, then the Q4 income before the restructuring charge would be $0.18 and even the dumbest on wall street would be able to figure out that Q1 2000 of $0.11 is low.
4)Of course all of this discussion assumes they do nothing with the reserve on deferred taxes. If they were to release some of the reserve and report Q1 2000 with a normal tax rate, then the $0.11 is reasonable. However, if they were to release the tax reserves (which would be a credit to income and offset some of the restructuring charge), then the $22 mm charge is really high!!
That is why I say it will be interesting to see the numbers. Either I am missing something with this $0.11 estimate for Q1 2000, or SNDV just assumes that all of us "little" investors have fallen off a turnip truck.
SJO
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