Jamie, I have been following this stock since the beginning of the year. I was recommending this on "Mohan's List" on prodigy since June. I am lurking here to get the input from the techno-nerds and assimilate the info in to my judgment. Here is what have to share with this thread, which I just posted on Prodigy. Any comments?
Good luck!
-Mohan
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STII results are out. They just met the expectations. At first glance the numbers did not look that great. Then I reminded my self why I am long on the stock. At a closer second look, I liked the numbers very much. First, they are making more money now than a year ago from not so great existing operations. Second, they are able to fund R&D at a larger scale, which is the main thrust of my bullishness on the company. Third, they have strategic alliances with HWP and Motorola. Recent Motorola's announcement about the $1.2 bil satellite project is expected to get some business to STII. If you look at the ADSL companies like WSTL and AMTX - so much is riding on just "expectations." STII offers us a solid financial and technological base and good reason for optimism. Here are my points on the earnings report:
1. Revenue up 15% to $41 mil from about $35 mil - not bad for a company with over 40% business from the Government and only 30% from commercial clients.
2. Gross margins at 24% up from 20% last year, 21.6% 1st quarter of 96.
3. Marketing administrative expenses are in check!
4. I wondered where all the gross margin improvements disappeared in the final numbers - they showed up in R&D expenditure. The R&D expenditure is up 54% to $3.44 min. from $2.23 mil from 1Q and 68% from prev 2Q of 95. This is where they have some leverage. If the company wanted to beat estimates, they could have done it, IMHO. I like the R&D spending part of it. I am bullish on the company's future prospects, not from current operations.
5. One reason for concern, almost flat backlog. But, with the deployment of cable modems and PCS on the horizon, I hope this will change. Also, there is speculation in the Street that STII may bag some contract with Motorola's for the recently announced $1.2 bil satellite project.
All in all, today's selling is perhaps by the earnings players. Or, may be somebody else saw what I did not see. I am holding on to my shares. I have decided not to apply my stop-loss rule to STII. With $2 speards, the MM's could take it all from me.
Good luck!
-Mohan |
