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Technology Stocks : ACTM $100 Million Cable Modem Contract with MOT
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To: Rob Preuss who wrote (481)2/26/1998 2:50:00 AM
From: Gordon Quickstad  Read Replies (2) of 1250
 
It isn't necessarily going to be a big hit on the earnings announcement. Being's it's inventory, then it will affect assets, but it may be mostly insured. If it's an internal accounting snafu, then they may have to spend more money to replenish inventory that they thought they had and that seems like it would affect the next quarter more than the one being reported. It the shortfall is covered by insurance, then there won't be much effect at all. "Material impact" could just mean that earnings are affected by $0.01 to $0.03 per share.

I'll play the guessing game: It'll open $0.50 lower and stay around there, but may be influenced lower if the market takes a dip. If the overall market stays the same or goes higher, I think ACTM will be down for the day due to the uncertainty and will stay modestly down until the earnings are reported, probably within 5 business days. Then I think the earnings won't be as bad as feared.

The PE is still significantly lower than the rest of the market and 1998 earnings are projected to be much higher than the trailing earnings which give it about a 16 PE ratio. I think this is why the stock won't get hurt too bad. I'm assuming that the inventory in question is not warehouses full of their most valuable product that got rejected by the OEM who ordered it but got credited as sales by the bean counters.
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