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Technology Stocks : Emulex, What Prospects?
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To: Claude Edelson who wrote (71)1/25/1998 10:33:00 AM
From: George Dawson  Read Replies (3) of 788
 
Claude,

If you believe in Value Line they have a much more conservative estimate of Emulex stock performance. Here are a few highlights:

1. A steady downward trend in EPS since 1989, with 3 of those years showing a negative EPS. I don't know what their business was in 1989, but they were making $2.30/sh compared with $0.36/sh in 1997. During this period the outstanding shares were increased slightly from 5.5M to 6.1M.

2. The average annual PE has gone from 8.7 in 1989 to 45.1 in 1997.

3. The value of the deal with Groupe Bull is unknown. I read recently that Groupe Bull has a general policy of not disclosing or estimating how much product they order.

All things considered it looks like a speculative buy. Additional factors that need to be considered would include their ability to ramp up production if fibre channel really takes off and also that they have fairly significant competition in the FC adapter and hub field.

George Dawson
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