Charlie,
My big question at the moment is how a shortfall of maybe 10% in gross revenues (I'm guessing they were trying for $280M, and will get around $250M), would result in an earnings shortfall of 30% (40c vs. 56c previously expected). That 16 cents/share equates to about $18M in net operating earnings. Now, if the revenue falls $30M, how could the net after-tax earnings fall $18M? Even if ALL the falloff in revenue was hi-margin PCI SCSI boards, there's no way they'd have 60% after-tax margins on those products. (I'm ignoring the one-time accounting charges they've also pre-announced.)
Something's weird here, if my math is close to correct. I'm wondering if their cost structure has temporarily gotten too high. About a year ago, Dec. '96, they reported revenues about the same ($252M), yet net earnings were 46 cents. Now we're looking for about 40 cents on the high side. And, FYI, the stock was valued at about $40 back then as well, no doubt on expectations of growth.
Maybe you can learn something to help answer this question during the Tues. conference call.
Of course, I'm hoping the company's conservative reporting stance has caused the worst-possible hammering in the short term, that things won't be quite so bad as anticipated and that the stock will recover into the 30s in a month or so. Nice to dream about, anyway. What a week it's been.
Jim |
