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Technology Stocks : Cadence Design Systems
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To: arnie h who wrote (102)9/24/1997 5:03:00 PM
From: Bill Wexler   of 668
 
The mystery of the market.

If everyone agreed and the markets were truly rational, then this stock would be at zero. It's when people do stupid things that opportunity is created. Who would I short to if there were no buyers at 30...and where would I get shares to borrow?

I'm guessing that investors who are paying 30 a share consider themselves savvy contrarians and really believe that Avant will be unscathed by these problems. I don't believe they really understand the niche that Cadence dominates. If they did, they would realize they are paying an enormous premium for what amounts to a dinky competitor.

Let's take Avant's legal problems out of the equation for a moment. This situation is analogous to the Microsoft/Borland position in the early 90's. Borland certainly had (and still has) many fans claiming technical superiority, but this didn't mean that Borland was able to effectively compete with Microsoft's far superior business. Avant has many fans also who think their tools are better than Cadence's. However, when people get religious about technology and invest only because they fall in love with a product, they may be missing the big picture.

Interesting to note that Avant is trying to grow its business through acquisitions. I'm sure they are also doing this to distance themselves from their current line of tainted software. Unfortunately, they are overpaying for weak companies (such as COMPASS). Borland also made disastrous acquisitions at ridiculous prices (remember Ashton Tate?)

Despite all the bizarre claims to the contrary, Avant is getting into a deeper and deeper hole. Time will reward rhe patient short seller.
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