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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: LindyBill who wrote (16972)	2/2/2000 11:52:00 AM
From: Eric Jacobson	Read Replies (1) of 54805

RE: HLIT LindyBill, as Mike pointed out, the numbers for 1999 match my numbers. What might be throwing you off is that they had a loss of $22.1 million for the first three quarters of 1998. I didn't mention this in my write up. This was caused by two things: (1) there were some one-time charges associated with the purchase of New Media Communications; and (2) there was a period in early 1998 where TCI turned the spigot off while they reevaluated their upgrade plan. Since TCI was their largest customer, it had an effect. Although revenues remained relatively flat for three quarters (they didn't go down significantly), gross margins went from 46% in 4Q97 to 31% in the 1Q98 due to the shift in product mix and less throughput. This is a potential problem when you are fairly dependent on a single customer, and a problem they are still exposed to with T representing 40% of their sales.

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