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Technology Stocks : Silicon Graphics, Inc. (SGI)

SGI 90.70

+1.6%

3:59 PM EST

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To: cc rogers who wrote (1594)	6/14/1997 5:23:00 PM
From: Carl R.	of 14451

So we have clear insider buying, and now unconfirmed rumors of heavy employee buying in 1997. I like it! Also rumors that "they are kicking things out the door quickly". All these point to a solid or even spectacular quarter. The thing to remember is that Wall Street doesn't believe anymore. This stock is an ugly duckling, left to rot and forgotten. The stock is selling at below 17, and the expected earnings for 1998 after many reductions are down to something like $1.32, so the PE based on the next 12 months is under 13. P/sales is less than 1. Is the company sick and on death's doorstep like Apple? Hardly. This is a big company, and is profitable. Sales are still growing. Orders are strong. The backlog is growing. Margins are improving. So why is the stock so cheap? Because they have committed the cardinal error of reporting lower earnings than street estimates for something like 6-7 quarters in a row. Compare that to CYRX which carries a much higher PE and PS even though they have only reported 1 profitable quarter in the last year. Like CYRX, SGI has shown steady increases in profits (decreases in losses) for the last 3 quarters. The difference is that at CYRX Jay Swent knows how to guide analysts to low numbers and then beat them. Let's hope that this quarter that is what SGI has done. They have guided analysts down from $.60 this quarter to $.35. Now if they post say $.55 it is a big upside surprise, whereas if the street still had an estimate of $.60, then $.55 would be a dissappointment. Oh and one more tidbit. The dollar has been relatively cheap lately, and my understanding is that a cheap dollar tends to improve earnings. Carl

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