Response to Barron's article ...
The following post appeared on AOL today. I can neither confirm nor deny the assertions made. (I will say that, in general, LITEZ001's posts--although not always polished--suggest knowledge of the inner workings of Zitel/Matridigm far beyond what the average investor can verify. The reader must decide if such "knowledge" is trustworthy.)
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Subj: Re:Barrons article
Date: 96-10-20 14:19:11 EDT
From: LITEZ001
I will now spell out the FACTS behind the Barrons article and related items. It appears that few, if any, on this board (no offense) are experienced with various tactics employed by some players on Wall Street. The article states that the stock rise from approx 21 to 27 may have been the result of the Stewart Report. The FACT is that Kris Tuttle (Soundview analyst) had breakfast with the principals of Zitel and Matridigm on Monday 10/7. Breakfast was rather long. It ended at 11:30 (2:30 est); then, beginning at about 2:45 est, the stock rose approximatley $2 on approximately 250,000 shares. On Tuesday the stock rose $5+ a share. When the Stewart report hit the fax and was mailed, it may have inflated the move, but Soundview was largely responsible!
Referring again to Wall Street tactics, the press is often controlled by the shorts! In this case the article is clearly written with a negative bias. Why didn't the writer contact Matridigm? Why didn't the writer refer to the Matridigm brochure given out at the show? (If you haven't read it please do; it states that Matridigm has a fully automated solution, converting 50 million lines of code a week. See SMKCPA's post from 10/18.) Why didn't the writer contact Kevin Schick? (He's only the world's leading authority on the year 2000 problem). Why didn't the writer talk about Proposition 211 with respect to "foward looking statements"? Why didn't the writer contact Marlene Lockhart at the State of Nevada, or Chubb, or perhaps Smith Barney (beta sites)?
The following from the article is either quoted out of context, a miscommunication, or a mistake. The FACT is ... it is wrong! "But the technology, he suggests, is not the 'silver bullet' that some supporters have bandied about .. and represents 10%-15% of the actual work involved in that solution". If you wanted to buy your best clients Zitl stock, wouldn't you play it down publicly? Remember what happened after breakfast!
With respect to the IBM royalty stream, it was widely expected to end soon. The FACT is that RAMAC 3 is selling very well, and King sees "relatively flat" royalites through next year, which is much longer than anyone expected. Of course, this is IBM's seasonally weakest quarter, so we are looking for the numbers to be down (widely expected).
With respect to Zitel's core business, this has been a disappointment. The product is a winner; however, Zitel has been horrible at execution. Word at the Gartner Group conference was that Zitl's product is coming to market at a perfect time. The Zitel side of the shared booth with Matridigm was quite busy; however, based upon comments by the board of directors, current management will not be in place beyond the begining of 1997, if operational profitability is not met (a huge postive). We believe management possesses enormous industry insight and hope they will remain with the company in a technical capacity, but stated blatantly, they can't sell.
Since the stock appreciated solely on the merits of Matridigm, we believe that current earnings or lack thereof will have zero impact on the stock.
We challenge anyone on this planet to show us a stock that went straight up, that had no pull backs, that didn't consolidate, that wasn't the subject of much short attention, etc ... It is almost an initiation for stocks that continue to rise and that Barron's must do its hatchet-job, although this was quite balanced, with a negative posture.
As for the rumor of Kevin Schick possibly joining Zitel, the FACT is, it is true. Why would the leading authority on year 2000 consider joining Zitel if the technology didn't work or only addressed a small segment of the market?
The bottom line is as follows; while the entire retail community, the entire NASDAQ trading community, the shorts, and uninformed institutions are selling, SOUNDVIEW FINANCIAL WILL BE THERE IN SIZE BUYING AND LOVING IT.
Enjoy the ride (even if is bumpy short term).
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Wade |
