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Technology Stocks : RGFX Raster Graphics

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To: William Douglas who wrote (127)	8/1/1997 5:51:00 AM
From: Sam Citron	of 593

William, Excellent question. There certainly are some troubling similarities. Both companies compete in a very peripheral segment (with HWP among others) that is experiencing rapid growth. Both have tended to be positioned at the higher end of their segment pricewise. There are major differences though. VSNR was the pioneer in small form factor sheetfed scanners and had to spend alot of money to educate the market, which was literally invaded by HWP, Logitech, and a host of others with much greater resources and more efficient manufacturing capabilities. RGFX is more evolutionary than revolutionary, presenting the market with better and faster large format printers than were offered by the competition. They don't have to spend quite so much on marketing and don't have the headaches of supporting an unsophisticated end-user base. Unlike Encad and HWP, RGFX's products are targeted not at the end-user market, but at print shops and service bureaus who need high throughput devices. The P-5000 especially dominates its category and is almost without competition if you have $50,000 and need a really high throughput large format printer. The growth, both in the top and bottom line is intact at RGFX and they are at the beginning of the most successful product launch in their history with the P-5000. RGFX is selling at less than .5 the market multiple for a company that is growing 300% faster than the market. The conference call that I listened to and the private conversation with the CEO indicates to me that top management is extremely capable and can guide the company skillfully through the challenges of rapid growth. This is just my response from the top of my head. I would have to look deeper to do a more thorough comparison. I think it is an excellent exercise, because there is much to be learned from the VSNR case. I would love to pursue this further when I have a bit more time. SC

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