Everyone:
Let me reitterate what has happened and what is expected to happen, to put this point in time into context:
(Forgive me if I get something out of order)
1) Ken brought CAST to IAI, Sandy & Co. recognize that it has applicabillity to Y2k, a plan begins to form. (a few years ago)
2) IAI, which had seen sleepy growth in the saturated government professional services sector combined with the limited margins of that sector, moves to become a product company. IAI pays less attention to what it is leaving behind. The US Customs contract comes to the natural end of it's life, with a few extensions still in the works.
3) Brian, Dave and others come onboard at IAI. They start making deals and spreading the word in some corners. The stock takes off. Lots of us make money.
4) IAI invests heavily in product development, in a strategy designed to take longer but win bigger with fully funded development of the Y2K version of CAST despite not yet having customers demanding it. ( This is dramaticly forward looking for a company with a pro' services background.)
4) IAI signs a deal with CA, the stock takes off again. IAI hires more CA connected VPs than can fit in a small chineese resturant. BIG HEAVYWEIGHT management comes to IAI.
5) The shorts point out that IAI has reduced revenue and increased expenses (duh). The stock goes down. IAI chooses to announce no contract before it's time.
6) The market goes down. All Y2K sector goes down. IAI begins putting out CA products right on schedule.
7) The world delays Y2K implementation. All looks gloomy. Y2K companies do not see the expected revenue for the last quarter of '97.
8) The market recovers. IAIC goes up a bit. IAI continues putting out CA products on schedule.
9) IAI announces some of much work in house. IAI starts signing contracts like mad, but is not ready to announce. Rumors of CA IDMS COBOL abound.
Lets play what happens next:
10) Tomorrow Sandy says 4Q97 was slow, but not a deep loss like the prior periods of product development investment. Sandy says some details of all that work in and coming in now.
11) Revenues, not sufficient to justify current valuation on a pure PE model, come out. Still, IAI clearly shows that the money is coming NOW and this is the time to climb on board. Will IAIC be valued on past revenue or on speculative value based on immediate growth potential?
OK, we have a company with a low market cap and huge potential. Place your bet's. Last day before the world changes and the secrets are unveiled.
In my mind it comes down to this: If everyone understands that the contracts are rolling in, the stock goes up. If the consensus is doubt, the stock goes down. We are still in transition from a speculative to a standard valuation model till the data from this quarter come out.
Let's see if Sandy can make the situation clear in a credible way for everyone. I think that is the key.
This is my honest best guess. Good luck all.
.......................Matt |
