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Strategies & Market Trends : The Amateur Traders Corner

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To: captain_midnite who wrote (5955)	2/4/2001 4:31:35 PM
From: Wayners	Read Replies (1) of 19633

The whole selloff in JNIC has basically occurred because of worries about increased competition to their Sbus Host Bus Adapter products. At first "they" and in this case it was the team of Herb-Greenberg and Mark Cohedes manipulated JNIC lower--a lot lower--by getting people to believe that the Sbus slot was being eliminated immediately and get people to think that JNIC would immediately lose half its revenue--in a carefully crafted story. Absolutely untrue. It was denied by Sun Microsystem themselves. Its a risk factor for JNIC--but it ain't happening anytime soon. The Sbus standard has been around for over ten years and even QLGC admits it will still be around for several more years to come...minimum. On the issue increased competition sure JNIC is getting into PCI bus interface while EMLX and QLGC get into Sbus interface. Now why would EMLX and QLGC be getting into Sbus and announcing design wins in January if Sun had just eliminated the Sbus interface? Greenberg and Cohedes were very careful to ONLY use risk factors already contained in the JNIC 10-Q becuase if they made something up, then the SEC would have a case for making false statements to manipulate a stock. Anyways competition works both ways as JNIC is getting into the PCI Host Bus Adapter space. Now seems to me that this whole sector is under the same competitive landscape and their margins have to be pretty similar. Therefore I would presume that sector valuations should also converge. Either EMLX and QLGC are too high or JNIC is too low. I have a feeling its really both. Fair value for JNIC IMO is $35 to $40 taking account its next year's estimates, growth rate and book value. JNIC's management has hardly changed its forward looking outlook. Sbus is not going away, Margins might be a little lower in the first half until JNIC improves its production efficiencies to better meet the EMLX and QLGC challenge. We'll see results of that in the second half. EMLX can try to undercut JNIC on price, but I'd suggest that EMLX can't do it without losing money on every HBA sold. There's no way EMLX has gone directly from their first Sbus design win to the most efficiently produced HBA in the industry in just a few months. I also don't think EMLX wants to start a price war in Sbus that will carry over to PCI. The analysts are washed out with their downgrades, the sheep have sold to the analyst slaughterhouse. Its time to buy as soon as the Nasdaq forms its next higher low.

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