Individual Investor's Special Situation report issues sell rating on Romtech the report is dated 7-8-98:
RomTech makes budget or value priced software (under $20), including games such as Solitaire, and office help products such as Fonts. Its Galaxy of Games series of titles, which offers customers more than 300 games for $9.99, has been a consistent best seller since the beginning of 1997.
RomTech announced a management shake up, in which CEO Joe Falsetti resigned from the company abruptly. CFO Jerry Klein has taken over as CEO. This caused the stock to plunge to as low as $1.25 per share, before rebounding bach to $2.00.
In tandem with Falsetti's resignation, the company announced it will miss estimates for the fourth quarter. Instead of posing $0.05 per share on revenue of about $2.5 million, it will post break even results on revenue of about $2.o million.
CEO Klein said that the Windows 98 release, combined with a severance charge for Falsetti, caused the company to miss estimates. Klein also told SSR that after Mr. Falsetti left, he and Odyssey Capital had a discussion in which Odyssey agreed to not sell any more shares until the stock goes above $5 per share.
All that bad news aside, Jerry Klein thinks the company can earn $0.40 per share in fiscal 1999. RomTech will raise prices from $9.99 to $19.99 and will add more games and content to form a superpak. Based on surveys with customers and talking to its distributor, Slash, Klein thinks the strategy will work.
Galaxy Online will undergo its offical launch this fiscal year, potentially adding to sales.
The CEO resigning, the company missing estimates, plus raising prices to make up for lost sales are all telltale signs of a company in trouble. Do not fight all the bad news. Sell now.
Thought you all might want to know.
Greg J. |
