CYCOMM (CYII)-on aquisition trail Message Board

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Microcap & Penny Stocks : CYCOMM (CYII)-on aquisition trail

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To: Bullseye who wrote (1262)	5/20/1998 12:27:00 AM
From: Robert Morrison	Read Replies (1) of 1800

Bullseye. Maybe this Dell thing makes sense but if AT&T are still holding shares then any ideas on how they would fit in with this scenario other than as a grateful shareholder? Bullseye can you somehow check to see what shares AT&T is still holding? Valuing takeover targets is tough. Firstly takeovers always start happening late in the market's cycle because the predators are flush with cash and success and start scrambling for growth through acquisitions rather than market growth naturally. What this means is the target should sell close to the PE (say 80%) of the offeror if the offerer is going to be able to sell the acquisition financially and even higher if the offerer can sell the acquisition strategically. For Cycommm you'd have to project out of current losses to give you this figure but say if Dell is at 25 times PE (I haven't checked the figure yet) then CYI would sell at 20 times etc. Because of the spread of the shareholders in CYI the offeror would have to make an on-market offer and this would mean paying a premium because they would be coming out of nowhere (0% to 100%). Say if Cycomm is heading for $80M revenues and say a $8M bottom line (10% net) then we are looking at a valuation of $160M or $16 per share using this method. With a premium for taking Cycomm out of the market altogether an offer of $20 per share would do the trick. From the insiders' point of view this would be a pay off of 10 times their investments at $2 per share. I read somewhere that most venture capitalists look for 20 times their money when funding seed capital maybe this is a valuable guide or not. The presence of stock options might make a $20 offer fit with this formula. I think Bud will probably not be contemplating a takeover unless Dell's marketing channels would justify it from a business point of view. Insiders also don't hold enough stock to guarantee to an offeror that the takeover would come in at the right price. Nobody have effective financial control eg 30% which can be sold on to the offeror straight up to give them only 20% more to get in the market. He will make much more money I feel through getting the stock to $20 on its own and then doing a nice 2/1 split and back up to $20 again. This may sound incredible but if Cycomm can fly the flag about being the dominant player in the rugged and secure computer markets then we should see the market give Cycomm a huge push in value. After this Dell can do business with Cycomm if it likes through a reseller agreement. Dell's marketing channel's are all retail anyway so I can't see how they would bring any customers to Cycomm's products. I would be most happy with $40 per share in the next 2 years and of course the takeover is pure speculation. Rob

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