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Technology Stocks : FORE Inc.
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To: Ed Frye who wrote (7194)1/20/1998 11:34:00 AM
From: Pam  Read Replies (1) of 12559
 
Ed:

Don't worry too much. ATM will really take-off this year. As for the price-cuts this morning, this is nothing new. Fore has been dropping prices every year and if you look at their Income Statement, even during bad quarters (1Q and 2Q of 97) their Gross Margins were very stable at 56% (it dropped only 1-2% from their normal GPM rates) so these cuts can be easily absorbed in their business model. Further if you pay attention to their Operating Expenses, there is a big surge in R&D (up from 12-13% of Rev to 16-17% in recent Q's) and S&M (up from 23% to 29% of Rev in recent Q's) spending, which is shaving-off their bottom-line. This is just temporary and when they come back to their historical spending rates in these two areas, their OPM will improve by 10% or about 6.6% on an after-tax basis ==> approx. 7c per share per quarter if sales are in the ballpark of 110mm per Q!!! Fore will be just fine. Just pray that their top-line grows an average of 7-8% sequentially!

Pam
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