Roger's 1998 Short Picks Message Board

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Strategies & Market Trends : Roger's 1998 Short Picks

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To: Don Westermeyer who wrote (7555)	4/22/1998 12:15:00 PM
From: Lazlo Pierce	Read Replies (1) of 18691

Interesting analysis on Briefing.com re:REDB *************** RED BRICK SYSTEMS (REDB) 9 1/4 +1 5/8. The Internet feeding frenzy continues, and its irrationality is reaching new heights. While this is good news to daytraders who have been riding the wave, it should serve as a serious cautionary tale for most investors. The latest case in point is Red Brick Systems. This data warehousing company announced yesterday that Amazon.com had selected its software to develop a strategic data warehouse. Let's make one point clear: Red Brick is not an Internet company; it is a member of the beleaguered database software sector. Shortly after it went public in early 1996, Red Brick soared to $60/share and then plunged to a recent low of $5 as data warehousing failed to live up to its technological promise and therefore its market valuation. Red Brick's sale to Amazon does not represent a break into the Internet world, it just happened to make a sale of its software to an Internet company. To call it an Internet play would be like calling Exxon an Internet play if it sold gas to Amazon's CEO. Red Brick needs many more such sales to become profitable; it lost $0.39 per share over the past four quarters (excluding charges), including a much worse than expected Q1 loss of $0.32 reported just last week. Since announcing the Amazon deal, REDB has rallied a stunning 80%. If you're still buying this stock at these levels, you had better believe strongly in the greater fools theory. Even if you believe that the momentum driving Internet stocks will continue, you need to recognize that REDB is not an internet stock, it is a database software company losing lots of money. Take a look at that group (IFMX, SYBS, VSNT) and you'll see a very different kind of momentum from the Internet craze.

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