MERIX, Volume and stock are showing some momentum Message Board

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Technology Stocks : MERIX, Volume and stock are showing some momentum

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To: Doug McMillan who wrote (18)	6/25/1997 12:58:00 PM
From: rich evans	of 20

Doug, did you listen to the conference call? I heard the tape. Merix is doing poorly. They hope to improve by changing product mix. Basically they are leaving the 2-4 layer board business which they were doing to fill the shop. They have new sales force of 17 individuals who are out trying to get them business in the high performance board business of 8 layers and above. New customers are also part of plan but this takes time as must get in on next product cyle. The CFO mentioned CISCO. They are leaving the FLEX business-can't compete with old equipment and going to concentrate on only complex boards and backplanes. They do no assembly on backplanes just make the board so they are different from HDCO, Sanmina, ELEX, ALTRON etc which do the profitable stuff. They hope to get their gross margins to 20% by the fourth quarter of 98 and operating to 10%. They hope to do this sequentially each quarter which means about a 2% improvement per quarter. This is the best scenario and of course things could happen.Based on this plan and the indicated 38% tax and a 20% revenue growth which Debbie indicated was their goal, I don't see earnings doing any better then $1 per share in 98 and they will be fortunate to do that as all their plans must be realized. So Paul K and Creditman are right on this stock. Merix problems are not a one quarter blip but more long term which will take some time to work out and fix. Stock is not responding today and I can understand why. The anaylysts did not sound impressed. They have finished up with their best large board MOTOROLA business which was high profit. What do you and others think? Rich

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