Zeev: Rational reasons for the weakness? Depends upon what you mean by "rational". What I believed to be somewhat irrational--the first stage of the fall in December--when techs were hurting from the Asian problems, in reality may have been a genuinely realistic assessment of Adaptec's earnings as disk drive makers began to warn.
Then, while some wags were listing Adaptec as one of the great techs to have in a portfolio for 1998, Adaptec was checking its books for its 3rd quarter performance. It wasn't pretty and on 8 January it warned. And it didn't cite Asia as the problem.
Then, despite posting its 54th profitable quarter in a row on 20 Jan, the conference call conversation warned that the slowdown would continue for the current quarter. An honest and appreciated projection.
Then, last week Adaptec made a major investment, biggest ever for it, that looks to diminish its cash reserves considerably. Even with disappointing earnings for last quarter, one could point to that cash and rationalize hopefully-- "At least it has lots of cash." But can't do that anymore.
Then, the CFO reminded in the conference call basically that sales remain sluggish, at best, in one segment of its market. Another forthright announcement.
As individuals, we all make investment decisions in our lives that we believe are good but that entail risk. Risk taking is how we advance (not to get too philosophical here). The Adaptec purchase of Symbios is bold and dramatic but right in line with its core business. Such a move can revitalize a company. But like parents discussing their kids' purchase of a new home--how are they going to make the payments?--institutions are being cautious in their assessment of the Symbios purchase.
So, I think there are rational reasons for the low price of the stock. And one can be cautious and look elsewhere for an investment, or like Adaptec with Symbios, take advantage of a good deal and get the stock while it is at a good price. But we shouldn't expect any sudden rise in the price (at least not to where it was last fall). Give it 5 or 6 months.
Starowl |
