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Technology Stocks : Zitel-ZITL What's Happening
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To: BonniesGuy who wrote (8870)7/17/1997 5:28:00 PM
From: CalculatedRisk   of 18263
 
BonniesGuy, Welcome! We all pretty much agree on Zitel: the debentures, the acquisitions and the "core" business. We all agree that the real key is MatriDigm. To achieve the required $2 - $5 billion in revenue to justify their current market cap requires all of the following:

1) That the market opportunity exists.

2) That the product be fully automated.

3) That MD can successfully market the product.

I'm sure we will only agree on the market opportunity in the next millennium! (I am willing to debate the issue). But lets focus on points 2 and 3.

Is the product fully automated? The answer so far is no. Read TEDennis' posts regarding the product. We also know that MatriDigm has received no revenue in four months from Nevada. Does this sound like a "code factory"? And Mr. Babb, following up on your tip, discovered that MatriDigm struggled with some "try and buy" code. (It sounded like they fixed the problems). But the point is, the product is not the "one size fits all", that is required to achieve billions in revenues. This alone makes Zitel a strong short.

Can MD successfully market the product? The answer so far is no. They have only one contract (the factory has been open since February) and this is with their beta site. They have 10 VARs, but none of the VARs have any Y2K experience. This is critical. A successful VAR would already be involved in other aspects of Y2K conversion work (planning, analysis) and be looking for a tool to help with the conversion. These relationships are backwards. Meanwhile, competitors continue to show up with "automated" solutions and are signing with the established consulting companies. This marketing failure alone makes Zitel a strong short.

Maybe Z/MD will get some contracts (we have heard rumors for months), but they will never be able to achieve the revenue required to support their current market cap.

Once again, Welcome! Bill
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