Their are other factors to
consider. P/E is fine, but
P/S, etc. are also important.
Let me understand this, Syqt with a
mountain of debt and shipping about $300
mil/year is a "buy" at $3...IOM with a $100
mil in cash, 2 billion in sales and an installed
base of 14 million units is a $3.60 stock.
Yes, Price to Sales is very important. If you apply the same valuation to IOM as to SEG (which also has a strong cash position) and has better technology than IOM, than IOM deserves a price of about $3.50. When the auto first arrived horse hitches had a fairly large installed base too. Here, you have by IOM's own admission an installed base of 100,000 customers who are furious, having experienced the click of death. I've used thousands of floppies, and I've never encountered that serious a problem.
I don't believe that Syqt has anywhere near the outstanding shares as IOM, so comparing their stock price to IOM's on the basis of sales is meaningless. It should be on the basis of sales per share.
Finally, IOM does have a powerful and compelling cash position--at first blush. But future litigation, a failed advertising campaign, even more powerful competitors such as Sony, the need for further R&D diminish that strength.
Installed base? It appears that it may become fungible. Beta had an installed base too. Currently it's installed in the depths of my basement awaiting its reincarnation as an priceless relic thirty years hence at my estate sale. |
