Harlan,
You make some good arguments. Cabletron may go below 13 just because of the current "mini bear" market in tech stocks. If it does, it won't stay low for long. At 1.2 price to sales and pending merger activity, Cabletron is a gift at these prices. If Bay Networks gets $40 a share (comes to 9 billion) with 2.2 billion in sales, then Cabletron with its special assets ie Spectrum, Yago, Smartswitch and etc should be worth 5-6 billion. At 5.5 billion dollar buyout, you are looking at $34 a share.
Regarding the 7 cent number. Craig is a survivor. He has known how to please Wallstreet for over 10 years. Cabletron is shipping a lot of
new Smartswitch product right now and many are complaining about Craig's strong hand on expenses at the company. To me, this is a sign that Craig is getting ready to meet or exceed expectations. The expectations are so low at 7 cents that I think they can easily beat them.
With all this, who would want to short this stock? There is a possibility that it could go down below 12, but there is a much greater possibility that it will go the other way and much higher.
I agree, however, that Friday's close looks weak. Who knows, but I'm long and do not see much downside risk.
Jeff Bertrand |
