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Non-Tech : Simula (SMU)
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To: Rainier who wrote (1276)8/11/1998 9:57:00 AM
From: Noblesse Oblige   of 1671
 
Hi Lisa...

I see the sale of the rail seating business as part of a "back door" process that will result in the equivalent of a spinoff of the ITS division. Essentially, if you reduce the "other" portions of SMU revenues, you end up principally with the 16G and ITS operations, and both of those are growing sales much more rapidly than the balance of the company.

What management has to do is "perform" on these two businesses.

The call wasn't "terrible", but I have to admit that I was somewhat disappointed by the fact that there are still some unresolved vendor issues regarding ITS components and raw materials. That subject first became material in the third quarter of last year, and there is absolutely no excuse that a year later there is still even a bit of doubt that Simula has steady and acceptable costs and delivery schedules.

Aside from this concern, I am very comfortable with ITS (clearly a technology with unlimited future applications), and I have no doubt that 16G will garner a significant portion of the total market.

The stock already reflects a significant amount of "bad news," and sits out there every day (at current prices) voting its lack of confidence that management can achieve stated objectives. If one assumes the average 1999 earnings estimate is in the ballpark, the shares are trading at roughly half the market multiple *despite* the ITS family of products...which are likely to grow at least 50%-100% annually for the next several years.

Have a good day.
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