Eric:
Before I respond, I must comment on your copying my post to you here last week that you have copied onto the Raging Bull thread along with your editorial. See ragingbull.com Of course you are free to comment to my responses to your inquiries, but if you must do so, I would appreciate you doing it "face-to-face" so that the underlying issues behind your comments here can be drawn out into the light of day.
For starters, your characterization of my post as meaning "VALUE DOES NOT MATTER" is inaccurate and a complete misreading of my response to you. If you would take the time to re-read the post you will note that my response was directed to (1) how I myself invest; (2) that I do not necessarily subscribe to value investing; and (3) that when it comes to valuing a company I really wouldn't know since the market assigns a different value to a publicly traded company each day the market is open for trading.
Now with that said, it appears that you have been frequenting AFCI boards here & on RB with a vengeance, but only in the past week or so. That alone speaks volumes of your MO here. You caution a poster on RB "Do not get me wrong, I believe AFCI is an excellent company with significant opportunities going forward for at least the next 24 months. I own over 3,500 shares and have been invested in the company for almost two years," but openly questioned its valuation and have posted links to newswires that you interpret to be negative to the company's outlook going forward.
On one-hand you appear to grasping for a reason to sell or short this stock, yet you claim to be a long term investor holding 3500 shares. Well, if you're truly long the stock then sell it, and stop trying to convince yourself its overpriced. The stock is overpriced to a value investor, but not necessarily so to a growth investor. You for some reason don't seem to be able to comprehend that a stock could be valued differently by different types of investors. Well, that's what makes a market.
As far as your question regarding Marconi sales of the UMC1000 product line, I can not answer with authority, but can only speculate that Marconi will likely try to convince its customers to "upgrade" or switch to Reltec's box when the first opportunity comes along. However, what is valuable to AFCI by the terms of this settlement is not just the revenues added to its bottom line througy FY 2002, but also the entry of its UMC1000 product line into markets that it might have been shut out of by Marconi's presence. These customers might be very happy with the UMC come year end 2002, and wish to work with AFCI directly rather than Marconi should Marconi decide to push Reltec's platform in the years following 2002.
If you spent some of your efforts understanding what you invest in rather than just crunching numbers, you would learn that in the telecom business carriers just don't buy equipment, invest in technology, and install platforms based upon proprietary technology only to change their minds a few years down the road and switch to another vendor with a different platform. The bottom line is once the UMC1000 platform is established in these markets that Marconi maintains a customer base, its going to that much more difficult for them to compete with their own Reltec product unless it is thoroughly compatible with the UMC platform. This is a stern penalty, but a just one, since it is evident from the settlement that the technology behind Reltec was stolen from AFCI, and therefore the sales from this technology rightfully belong to AFCI. If Marconi-Reltec can develop & improve upon the technology and distinguish it from AFCI's improvements by that time and sway business away from the UMC then they've earned it, but IMHO, it will be difficult as once the UMC is installed it becomes part of the legacy infrastructure that the carrier will be loathe to abandon.
As far as LU and their IAD with WCII, and LU's own NGDLC, your concerns are way overblown. First, LUs deal with WCII was likely negotiated long before AFCI acquired GVN, and AFCI may very well have acquired GVN because it sensed a gap in it product line that some of the larger vendors could offer their customers. Second, it is inevitable that other companies such as LU would introduce into the marketplace their own NGDLC to compete with the UMC, Litespan, Reltec and Fibex competing product.
The bottom line Eric is that with growth stocks, revenues are always growing, and very often at relatively quick rates. So in terms of PE, one can take the view that the company whose stock has retreated due to valuation concerns, if truly a solid growth company, will grow it revenues and become "less overvalued" in the eyes of value investors over time. A term we hear a lot is that the "stock got ahead of itself." If you accept that view, it is clear that over the long term the stock will reward the long term investor.
In contrast, the same cannot necessarily be said for the value investor who for example have been clinging onto paper & other commodity stocks for years and really haven't seen their "value" unleashed. Investing is like beauty, which is in the eyes of the beholder. |
