Louis, first, I want every one to know, I am not making a table pounding argument as I did in Feb 1999 (stock then at $4 split adjusted). Yet, the stock is now cheap relative to the market. Despite the fact that Digital TV is taking off slowly, their top line increased by 30% relative to last year. I expect the next few quarters to be even with or greater than the current quarter, thus yielding annual sales of $80 MM for a company that now has a market cap of less than $180 MM.
As long as they are operating in the positive cash flow mode, I do not see what is the problem you have with the fact that they have "only" $5 MM in cash, that is quite ample particularly in view of the fact that they probably will have some $10 MM plus in accounts receivable.
Digital TV is slow in coming, but it is expected to be accessible to all in the US by 2002. I see nothing wrong with a company spending (and thus impacting its bottom line) for a market that is going to be in full bloom in 18 months or so.
I think that the hickup, while not pleasant, is not anything pointing to be intrinsically wrong. Their reduced profits are fully accounted for by at least $500,000 in additional investments in a marketing and sales organization in Europe where DTV is much more prevalent. That is what I would expect a smart company to do, invest where the market for your products already exist.
This company is far from being a POS as stated by a number of people here. Buying in the $18 to $22, which is also the area of the last breakout should prove rewarding. If we break this are, I'll have to reexamine my tenet and look for additional problems. I do not expect anything more than a DCB in the next few weeks, but after that, we might have anticipation of better times (providing we do not slide into a bear market, than all bets are off).
Zeev |
