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Technology Stocks : Network Associates (NET)
NET 200.10+1.6%Nov 28 12:59 PM EST
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To: Chuzzlewit who wrote (2317)4/6/1998 12:16:00 AM
From: ahhaha  Read Replies (3) of 6021
 
Even if NETA meets analyst's expectations, the stock has very little upside potential. It may rise to 67 in the next several days, but if it does that especially on weak volume, or many small volume lots, the stock should be sold. It's fully priced and vulnerable to a sizable correction. I estimate that by June the shares will have cut through 50. A summer rally may bring it back up to the upper 50's, but then it is going to get a real whacking in the fall.

The initial phase of price weakness will be due to exogenous factors and the later effects will be due to a major earnings slow down. In '99 there will be several quarters of loss. This is just a natural evolution of sales and profitability for any rapidly growing company.
There will also be the further kicker of a reduction of large company expenditures for computer related equipment and services. The reduction will be caused by cyclicality and the negative psychology brewed by interest rate increases.

In NETA's case there is the disynergy of disparate corporate cultures. The Queen of Hearts management style of lopping heads won't be enough to stop the corporate bleeding and the SDTI implications shouldn't be so readily dismissed. Sales are slowing because the market is somewhat saturated and margins are being pinched for a plethora of reasons. The virus issue and security concerns have become diluted and no longer hold MIS in total fear as they did in the past.
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