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Technology Stocks : Creative Labs (CREAF)
CREAF 0.4700.0%Nov 28 9:30 AM EST
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To: JP Sullivan who wrote (13904)3/25/2000 7:23:00 AM
From: Fred Fahmy  Read Replies (2) of 13925
 
Winston,

<Seems like CREAF is positioning itself to be perceived as a dot-com company.>

Actually, this has been going on for some time now. I believe it started around mid-year 1999.

In addition, their venture capitalist activities have been very successful. The returns from money that they have invested in internet startups and other techs (such as NVDA) have been excellent. They are also getting ready to ipo hifi.com in the coming months, followed by other possible ipo's. Finally, their traditional core business appears to have finally bottomed out. Although revenue will be down this quarter vs. last year, it should start showing some growth again in coming quarters. What's much more important is that the trend in margins appears to have finally reversed. Hopefully, this will lead to growth in gross profit and operating income for the first time in a long time.

In summary, I think the stock is doing well because:

1) WS is buying into their internet strategy.

2) VC activity has been very successful and they have plenty of cash flow to fund more of this activity.

3) The traditional core business appears to have turned the corner after many quarters of negative growth.

4) Expectations have finally come down in line with reality (if anything, probably conservative now). It was impossible for CREAF to go up when they were consistently guiding WS to numbers which they would then miss. I think Sim finally figured out that being overly optimistic and then not delivering was a losing proposition.

FF
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