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Strategies & Market Trends : McAfee Associates (MCAF)
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To: Alex Meyer who wrote (277)12/5/1996 10:52:00 AM
From: Kashish King   of 298
 
Very few technology companies have any long-term debt, there's really nothing unique there. The growth you site is precisely why MCAF's stock price went throught it's meteoric rise but what you are seeing now is a leveling off of the rate of growth and a subsequent stalling of the price within its current trading range. Why? Because people have been pricing in future growth which the astronomical PE clearly demonstrates. With slower growth, that PE isn't justifiable.

Now as for being "misunderstood," the misunderstanding lies in the buying of their rhetoric about vis-a-vis the accretiveness of recent acquisitions. Like dozens of software companies before them, they are trying to acquire their way out of the antivirus quagmire they have themselves in. No amount of arm-waving will change the fact that we have more and better competition in their bread-and-butter product.

MCAF is also a technological desert and their antivirus product is nothing more than a warmed-over relic from the DOS shareware days. There's no doubt whatsoever in my mind that this stock will be well into the teens in '97 and perhaps out of business altogether. Do you really think this company is worth close to 3 billion? Look at the companies in that league and their earnings and you will see what I mean. You have companies whose earnings are more than MCAF's gross revenues and with less of a market cap than MCAF. The only misunderstanding is the same misunderstanding that prompts folks to pay $200 for Presstek and $80 for Iomega. It's called unadulterated ignorance.
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