Wake up thread!!!!
A little something I came across today...
News Alert from Business First of Columbus via Quote.com
Headline: Giving 'Big Blue' the 'Big Sell' merits consideration
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Dear Mr. Berko: I own 400 shares of IBM. On your recommendation
in 1993, I bought 200 shares at $23. It subsequently split, and IBM,
as you know, now trades about $105 a share.
Several times during the past six months I've been tempted to take
my profit and just didn't have enough conviction to sell the stock.
I've got one heck of a profit thanks to you, and I'd appreciate your
hold-or-sell opinion on the stock. And even then I'm not sure I'll
take your advice. - A.T., Fort Walton Beach, Fla.
Dear A.T.: You may be asking the wrong guy about IBM (IBM-$102).
We bought some 43,000 shares of IBM at $49 a share in January 1993
for our managed accounts and watched helplessly while the dividend
was cleaved from $2.42 to 50 cents and the stock ruptured to $40 a
share. Those were Tagamet days.
We sold IBM in 1995 at $78, figuring it had peaked and run out of
gas. Then we watched the stock rise above $100 and split 2-1 in June
1997. And you're asking me if IBM should be sold? Not very smart,
you. However, you might sell your original 200 shares, wherein your
cost basis is $8,600, and keep the split stock just in case I'm
wrong.
IBM was foundering between 1991 and 1993, and its shares plummeted
to $20. In 1993 IBM canned CEO John Akers and hired an outsider,
Louis Gerstner from RJR Nabisco, who had no experience or computer
savvy, to run the company.
They said it couldn't be done, but that doesn't always work.
Earnings increased from 3 cents in 1993 to $5.97 in 1997, and the
stock price moved to $113 a share after a 2-1 split. However, IBM
may have seen its best days, and it may be time for Gerstner to step
aside for a less able and less experienced man. Here's why.
Earnings for 1997 increased 38 percent from 1996, yet revenue grew
only 5 percent. And that increase isn't all due to improved
efficiency. That huge earnings gain was aided by a $70 million stock
buyback program plus a tax rate that plummeted from 40 percent in
the third quarter of 1996 to 34 percent this year. Backing out these
factors, IBM would have earned about $3.50 a share.
Meanwhile, IBM seems to be losing ground in four of its main
business lines. Computer hardware sales have inched lower, software
and maintenance sales have fallen, rentals are down and financing
revenues are flat. And IBM continues to lag in booming PCs and
server products. This slack was taken up by services, which account
for 26 percent of its revenue and grew 22 percent in volume last
year.
Hitachi and Compaq are nipping at IBM's heels and seem to be
drawing blood. This computer colossus is lagging the industry in
growth, and a significant portion of its recent performance is a
result of financial shuffling, not fundamental improvement.
I just don't think that IBM is as good as the market seems to say
it is. But remember, I sold IBM 100 points too soon.
Dear Mr. Berko: What do you think of VTEL Corp. and VideoServer,
both of which trade in the very speculative over-the-counter market?
My broker has recommended that I buy them for long-term
appreciation. I'd appreciate your sage advice. - M.E., Norman, Okla.
Dear M.E.: That broker may have given you two good ideas, and my
sage advice tells me to defer to your adviser. My knowledge of this
high-tech, esoteric stuff borders on empty. But I'll tell you what I
know, which ain't much!
VideoServer (VSVR-$15) develops and sells hardware and software
networking solutions for multipoint and multimedia conferences,
enabling users to communicate via a variety of networks and interact
as a group. VSVR is the leading supplier of multipoint control
units, with nearly 70 percent of the market.
VSVR has excellent technology, strong management and a superb
balance sheet. Sales have grown from $15 million in 1995 to $70
million in 1997. VSVR lost $14 million in 1997 due to a $14 million
pretax charge for purchased R&D.
However, earnings are expected to reach 9 cents a share ($11.2
million) this year. VSVR has zero debt, 13 million shares out, mucho
cash and 65 percent of its stock is held by institutions.
A dozen years from now, multivideo conferencing may be as normal
as salt on a table, and VSVR is on the crest of this wave. Its
shares traded between $45 and $55 during the past three years before
sinking to an all-time low of $10 a few months ago.
VSVR is a speculative jewel in the rough and requires investors
with a stout heart and high-risk tolerance. And in a few years a
patient investor may be very richly rewarded.
Now, VTEL Corp. (VTEL-$7) produces, develops and sells digital
visual communications systems. VTEL's technology integrates video
and audio conferencing, allows users to share the same software PC
applications and provides users with very high resolution images,
which is somewhat rare in the videoconferencing field today.
VTEL is the leading vendor of videoconferencing systems to
vertical markets such as education, governments and health-care
organizations. And the company has a strong marketing effort under
way to develop new clients in the multinational business community.
VTEL has 25 percent market share (Picture Tel has 50 percent of
the systems market) and is gaining momentum at the expense of
Picture Tel ($500 million in revenue), which is in the midst of
management problems, legal turmoil and other not-so-good stuff.
VTEL's revenue has grown by bounds and leaps, increasing threefold
since 1993 to an estimated $158 million this year.
Its balance sheet has no debt and shows a good cash position, and
the stock that traded in the mid-$20s a couple of years ago could
trade between $11 and $14 in the coming dozen months. You can buy
VTEL only if you are comfortable playing leapfrogs with unicorns.
Please address your financial questions to Malcolm Berko, P.O. Box
1416, Boca Raton, Fla. 33429. |
