At a Q&A session last year, CEO ReiJane Huai commented on the
takeover rumors by saying that CA only buys companies in
distress, and since CYE is a strong and growing company far from
distresss, there would be no buyout. You may wonder now that the
price is down, does a CA buyout become more likely? I say no for
the following reasons:
(1) CYE executive management are strong, independent,
highly talented and are NOT the kind of people who would like
to be bought out and let someone else run their company. They
don't want to be bought by CA, they want to grow to the point where
they can BUY CA themselves, and I would not bet against them.
(2) In the past 12-18 months there have been sustained lows of
CYE in the 9-12 range which would have been a great opportunity
to start buyout process if indeed there would be one. Remember,
the rumors are several years old.
(3) CEOs of the two companies have common backgrounds and
possibly a friendly rivalry. They are both interested in growing their
companies by acquisition. Check CYE press releases: they have
been making strategic acquisitions for years, and have plenty of
cash and stock for that purpose.
As for sell off, I think this repeats a patter we saw 7 quarters ago: a
slight disappointment in one quarter followed by a bigger
disappointment and a dramatic selloff. Friday's rally on high
volume indicates that CYE was initially oversold. CYE will have
to post several quarters of strong results to regain inverstor
confidence. That is what it did during 1995. Now, after a
patient 2 yr wait to recover their 3-6/94 losses, long term investors
are back in the same boat. Once bitten twice shy, but now we
have been twice bitten. I look for 14-17 trading range for the
next quarter or two. Oh well.
One final point. It is CYE and most companies policy to release
news on earnings after the bell. I think someone at CYE heard
dorfman's report and saw the stock running up on false rumors,
so they decided to release the report immediately to prevent further
damage. (MY OPINION ONLY!!!)
- another poor slob losing big $$$ this week |
