Dow Jones Newswires -- January 26, 1998
Diamond Multimedia Falls 9%;
Profit-Taking Cited
By Ted W. Kemp
NEW YORK (Dow Jones)--Diamond Multimedia Systems Inc. (DIMD)
shares shed 9% of their value Monday, and market and company sources
said investor profit-taking was most likely to blame.
Diamond Multimedia, which develops and markets multimedia systems,
saw its shares decline despite a report of earnings late Thursday that
exceeded expectations and Monday's announcement that Dell Computer
Corp. (DELL) will use Diamond Multimedia's video card in its Dimension
desktop personal computers.
"It seems pretty weird to us," said Jim Walker, Diamond Multimedia's chief
financial officer.
The San Jose, Calif., company reported fourth-quarter earnings of 20 cents
a diluted share, compared with a First Call Corp. consensus estimate of 14
cents a share.
Walker pointed out that Diamond Multimedia's shares had steadily gained
ground since December, and he speculated that profit-taking was to blame
for Monday's slip.
Diamond Multimedia reached 13 1/8 Wednesday, having climbed from 8
7/8 on Dec. 30.
Youssef Squali, an analyst with Laidlaw Global Securities Inc., said the
stock's recent appreciation was too much of a temptation for investors
seeking to nail down their profits.
"It's gone from about 8 to 13," he said. "There's a tremendous amount of
buying into the stock at those levels, and now a lot of people are cutting
their profits short."
Analyst John Taylor of Arcadia Investment Corp. also cited profit-taking,
but was bullish on the company's fundamentals heading into the first quarter.
Taylor said first-quarter demand looks strong for the company's 3D
graphics business, while the anticipated establishment of a standard
protocol on 56K modems late in the first quarter by the International
Communications Union should improve the overall modem market.
Financial chief Walker said multimedia technologies generated about 80%
of Diamond Multimedia's fourth-quarter revenue, with modems accounting
for the rest.
Squali said sales conditions are likely to favor Diamond Multimedia as the
computer graphics market moves away from 2D to 3D and the 56K
modem standard improves sales of those products.
Diamond Multimedia's backlog heading into the first quarter is "at least as
strong" as it was at the beginning of the fourth, Squali said.
Diamond Multimedia closed Monday at 11 3/8, down 1 1/8, on volume of
820,300, compared with average turnover of 701,800. |
