Nice write-up in the online version of Individual investor. copied below.
<<New managment purchasing shares; SYQT a turnaround? (10/09)
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SyQuest's (Nasdaq: SYQT) last couple of years were difficult. Its products were expensive and slow compared to those of category leader Iomega; it failed to sign any contracts with OEMs, and its marketing campaign was a disaster. As a result, SYQT lost $126 million in 1996 and it shares plummeted as low as $1.50. The company was on the verge of going out of business.
There are now signs that the company could turn itself around. First, SyQuest replaced its entire management team in the second half of 1996 and brought in some seasoned veterans from companies such as Colorado Memory Systems, Primavera Systems and Western Digital. Second, it introduced SyJet, a new storage product, in February and started a sales campaign in July. According to analyst Howard Rosencrans of HD Brous & Co, SyJet competes favorably with Iomega's Jaz drive in terms of both pricing and speed. Sales representatives at CompUSA and J&R Computer stores in Manhattan have told us that SyJet is indeed selling better than Iomega's Jaz product.
The firm's new management has put their money where their mouths are. Between August 22 and August 29, seven officers of the company bought an aggregate of 39,800 shares at an average price of $2.46. This is the first time that SyQuest insiders bought shares in the past three years.
The company recently recruited two senior Iomega sales and marketing executives, Gary Jones and John Moran, in the past few months. SyQuest has also retained the Silakan Route, a global marketing firm under the direction of Paul Losee, one of Iomega's founders.
SYQT's financial hardships have also eased. Completion of a private placement of $20 million in convertible preferred stock, which is equivalent to 14% of the company's current market cap, also gives the company much needed capital to support and expand its domestic and international marketing efforts. In terms of accounts payable, "a year ago, we had to pay cash to everybody," says CEO Ed Harper. Though some key suppliers still demand cash payment from SyQuest, most are now extending it credit.
Analysts expect the company to lose $3.00 in 1997 and are uncertain about its future further forward. But HD Brous, which had been shorting SyQuest for a while, recently changed its rating from Sell to Hold. Investors should definitely do their own due diligence here, but it could be that this is a very cheap entry point to a big turnaround stock. >>
Should be an interesting day on Monday: My prediction is a gap in the morning and the first 10 minutes we'll see it run to the mid 6's. Then it will back track back into the mid 5's. But over the next few weeks I think we'll see a steady increase in the price. Of course that's if their product is as good as they say. I hear it is but they still have to steal away market share from Iomega, which won't be easy. But if they do it could be a big winner. The people who missed the IOM run might get the same thing here. I am in betting they can do it. The downside risk is a few points. But the upside is 10,20 30 or more points. Remember IOM went from 4 to 50 and then split a few times before settling in around 20-25. |
