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Technology Stocks : Zitel-ZITL What's Happening
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To: CalculatedRisk who wrote (16784)7/23/1998 8:01:00 PM
From: CalculatedRisk  Read Replies (1) of 18263
 
Hints on winning:

1) ZIT usually underperforms even the worst of expectations. I always estimate their losses and then add some more. I call this the ZIT management penalty ... or the J*King!

NOTE: This quarter, I doubt ZIT will underperform Barbara's estimate of a loss of $7.77M!

2) Last quarter the ZIT lost $5.49M, without any one time charges! From some respects, this quarter will be worse.

Bad news this quarter:
a) Y2K Solution Services got blanked again (OK ... nothing new).
b) Storage is being divested (shhh .... divested is a code word for shut down). Sales have probably dropped significantly.
c) Inventories were at $1.9M, mostly for storage. Expect a write down in this area.
d) Debentures were issued with a 10% discount. ZIT needs to write off $1M over this quarter and next.
e) In March, ZIT signed a new 5 year lease on their Fremont building at a substantial increase ... for $990K per year. Three months later, ZIT is now trying to cancel their lease. See above: J*King or Management Penalty!

Good News this quarter (for the bottom line):
a) ZIT has reduced their workforce from 246 at the beginning of the year to 161 employees as of June 30th. This should reduce expenses by approximately $1 to $1.5M this quarter.
b) ZIT received their final royalty payment from IBM this quarter for $740K.

In the end, it is probably best to just guess!
Regards to All, Bill
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