New Era of Networks (NEON) Message Board

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Technology Stocks : New Era of Networks (NEON)

NEON 2.950

-2.6%

9:39 AM EST

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To: Bald Man from Mars who wrote (1188)	11/22/2000 9:29:45 PM
From: wolfdog2	Read Replies (1) of 1222

What really happened? Here we have $10 million in low quality revenues in Q3 2000, which, when it's discovered, ends up killing the stock and throwing mud all over management. So what's going on? Why didn't management bring this up during the Q3 cc? Why did they feel they needed to hide these revenues? Well, let's start our inquiry by subtracting out the ~$10 million in low quality revenues. If we do that leaves us with ~$45 million dollars in revenues for Q3. What's wrong with that? After all in Q3 1999 the company earned only ~$32 million, so revenues jumped, year over year by 36%. Not bad. A growth company by any measure. But here's the rub. The company pulled in $51 million in revenues in Q2 2000. So reported revenues for Q3 would have declined sequentially were it not for the $10 in low quality revenues added in. It's my guess that the company wanted to hide the sequential decline. Sure, I heard their arguments that the start-ups with whom they were doing business would have bought from them any how, and the start-ups paid cash and their salesmen could have closed other business had they not been concentrating on the business with the start-ups. Sure! Tell me another one. This explanation smells. If management had bitten the bullet and been up front with investors at the outset, the stock would no doubt have taken a hit. But managements' credibility would not have been ruined. And there in lies the problem. If management is correct in their revenue and earnings' forecasts going forward, this stock is a steal. Management is projecting revenues of $300 million for 2001, which is a 50% increase over projected 2000 revenues (with the questionable revenues subtracted) and profits of $.50 in 2001. This means that currently the stock is selling for .78 times next year's projected revenues and about 14 times earnings. Quite a steal if the company comes even close to their forecast. If management makes their numbers (honestly this time) during the next two quarters, this stock could easily move back into the 20's.

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