Don, re SGI earnings, I think it's possible SGI will show an operating profit during 1 or more qtrs this calendar year. From there Dec qtr cc - an excerpt from my notes:
-------------------
"In 2H01 targeting profitability in Q4 and Seq & yoy growth for units & rev. Beginning 2002 GM 42.5, R&D 10%, S&M 18%, G&A 7% operating profit 7.5%"
"Outlook for next qtr Q3. Rev 525-550M, GM 34-36%, Opex 235-240M. Ongoing component shortages still an issue & goals won’t be meet if schedules for deliveries of components slip."
-------------------------
Certainly, they have left themselves an out. And certainly, you've got to consider that the economy will change their outlook. But my personal opinion is that they are trying to be modest in their stated goals. In the cc, when asked about the enterprise shortfall, they noted more concern with government spending slowdown. SGI is a small player and their rev and earnings may be based on the quality of their wins and government spending vice more macro effects. We won't know till they tell us.
Looking out another year of so I could see their rev stabilize at $1.6B. At 7.5% margin, earnings of .65 could yield a stock price of $9-10 with a PE of 15. Having consistently sold strike 5 calls against my position since last fall my cost basis is about $1.5. That would result a 500+% gain over a few years. In terms of $ risk reward it represents about a 6:1 ratio with my present position. I think that's a reasonable risk reward ratio.
Sorry for not responding regarding the sub incident. If your still interested in discussing it, I'll be back to the computer later today. Rich |
