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Technology Stocks : ObjectShare (OBJS)
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To: Jatin Kadakia who wrote (145)2/3/1998 6:08:00 PM
From: Raging Bull  Read Replies (1) of 185
 
Correction: Revenue and expenses have been have not changed
much from last quarter. Most of the operating
earnings improvements have come from cost reductions
primarily in the sales and marketing area (about 700K), General
and admin ($337K),
and R&D (224k). The ratio of R&D to G&A has historically
been about the same but the reduction in total R&D is certainly
a concern. Still close to $4 million annual is enough to make
some significant improvements. With development of OO tools,
more bodies often produces less output and they are probably
still within an acceptable range for their product line.

In spite of the 18% increase in license revenues they are still at
an historic low and represent a small percentage of the market.
If Object Share could sell even 1/4 of the VisualWorks licenses
that IBM VisualAge product sold, they would be doing great.
Most companies express concerns about Object Shares
financial stability rather than the product line when deciding to
use VisualAge. Java represents a large potential market although
it will be split many ways.

Again, I thought the risk of going under was the primary driver
for stock prices at less 10% of the average three years ago.
the potential upside appears to be fairly large. Large reduction
of costs primarily from staff reductions, while producing
stable or slightly higher revenue figures and near breakeven
operating income bodes well for the survival of a company with
$.60
per share in cash/securities and no significant liabilities that will
affect cash (other than about $.10 to pay for the accrued
restructuring costs).

Did other people see this stock as a high risk security with high
potential upside? Given the reduction in costs and stable
services operating income along with what appears to be an end
to the license revenue slide, I believe the financial risk has
improved significantly. The number of employees has been
reduced from a high of 460 to around 110. This reduces the risk
of high cash burn during a bad quarter or two.

Remember the company is still in transition to the Java line. Parts
for Java has received some good reviews but is not considered
a serious development environment that ObjectShare will
market to fortune 500 companies. They are in in the process of
developing a Java tool or enhancing the parts tool so that it can
be marketed to fortune 500 companies.

If risk of going under has been reduced, shouldn't the price
reflect a more significant increase?
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