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Politics : Formerly About Applied Materials
AMAT 254.72+0.9%Dec 1 3:59 PM EST
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To: Ramsey Su who wrote (20595)6/19/1998 11:40:00 AM
From: David Rosenthal  Read Replies (2) of 70976
 
Ramsey,

These human resources maneuvers are extremely expensive, especially in the high tech arena. I think when companies like NVLS utilize this strategy, they are at the end of the ropes and certainly are not anticipating a near term turnaround.

You are right that they are hunkering down and this is nothing but a veiled earnings warning. The way they are handling it is part of the game of managing Wall Street, which NVLS does well. Let's say you know that business is drying up for an indefinite period of time. You decide to cut costs. How do you handle the earnings news? If you put out a direct earnings warning you know that your stock will be blasted. However, let's say you make an announcement of layoffs to control costs. Then when you finally announce reduced earnings you can say that industry conditions are currently weak but that you took decisive action a month or so ago to respond. You wrap up the price of the layoffs as an anticipated one time charge and pitch that you have costs under control for the weak environment and that you are still well positioned to take advantage of things when business picks up. Making the announcement this way should play out better in the market.

Dave
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