Herb on Syquest
thestreet.com.
The Scoop on Syquest
Iomega (IOM:NYSE) rival Syquest (SYQT:Nasdaq) has never been able to dig itself out from under. However, now with Iomega stumbling, Syquest is finally starting to get attention, in part because of the success of its SparQ drive. Yet you wouldn't know it from Syquest's stock, which aside from yesterday's heavy volume has generally languished since the SparQ's rollout.
Investors have been turned off, in part, by the number of Syquest shares outstanding. On paper, there are 72 million shares. But what's really frightening is that another 100 million or so are in the form of warrants that Syquest gave in recent years to suppliers and others as a way to get them to give the company a second chance.
Investors have worried that once those warrants are exercised the dilution from so many shares will overshadow any improvement the company may eventually show.
So, why would anybody own the stock? One large Syquest holder, very much a not-for-attribution type, told me Wall Street's mistake is not factoring in the cash Syquest will get when and if the warrants are exercised. He figures it'll be in the range of around $250 million. And with 170 million shares outstanding, even at today's price of around $3 Syquest's market value will be just $500 million -- "just,'' that is, when you compare it with Iomega's $2 billion.
Both companies are expected to post losses this quarter. The difference is that while Iomega's business appears to be getting worse, Syquest's appears to be getting better. |
