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Technology Stocks : Silicon Graphics, Inc. (SGI)

SGI 93.75

-0.6%

Dec 12 9:30 AM EST

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To: brushwud who wrote (2960)	10/8/1997 1:16:00 AM
From: Eli Lauris	of 14451

<<Take off your rose-colored glasses and face reality--chasing low PSR won't help you avoid disasters without excellent management.>> I think investors always idolize the management as long as the stock is going up. When disaster strikes, the very same people are hated beyond belief. Look, this is just one quarter. Just as the last blowout quarter was not indicative of a trend, this one may not be either. Most of SGI's operational problems are already being addressed. It'll take time to adjust its sales and marketing strategies to the new markets; perhaps to make changes to management and cut costs more. But I think SGI still has a very competitive product line-up -- not necessarily the best or the fastest on each product -- but overall very competitive with e.g. Sun or HP. I agree with Jeff and would give this company more time to improve. Regarding the other point of chasing low PSRs: #1. If you average cost is around $20, you have only about 15% loss. If you cost is closer to $13, you're still 40% ahead. Following the opposite strategy of chasing momentum stocks would not have prevented you from taking a bath on stocks like Micron, 3Com, Ascend or Iomega. So this situation with SGI by no means invalidates Fisher's theory. Still, as Jeff pointed out, even with all the careful research and analysis you're going to take a bath once in a while since no one can predict the future with perfection.

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