I thought the call was very bullish.
Must admit I lightened up a bit today; 30+% in four days seemed too fast, and I wanted to reduce margin a bit. But the bulk of my position is intact, and I plan on holding it.
I listened to the call, and although the 4th Q and 1999 guidance was even lower than I expected, I still think the bullish case I outlined in my post still stands. There is a very good chance that this company could earn in excess of $2.00 next year; the $1.50 guidance is a 'basement' estimate. I even think the chances of retaining the Bay contract are quite good, which could drive the earnings higher.
They hit all my "hot buttons" in the call. I think these guys have gotten really focused on what they need to do to grow this company in the future. I would even consider the Bay situation a "wake-up call" if it weren't for the obvious fact that they had quite a number of the things I care about already in the works.
They are very focused on growing the Dovatron business to a critical mass of $1B. This means suspending things like stock buybacks, and utilizing bank debt as needed to reach that goal (my interpretation, reading between the lines and linking several statements they made in the call). The recognize the importance of being a global assembler, along with strong engineering support and with fast 'time-to-market' capability.
They are moving Multek into a global manufacturer of boards, with volume production capability and have started a backplane/backpanel business.
Their customer base will broaden, especially if they win the Bay biz, since that will reduce the percentages of their business done by HP and IBM, their largest customers currently. Even now, they have a broad customer base, but this will reduce reliance on IBM and HP. Their HP business has been pretty volatile; if HP had remained level in revenues this year, DIIG's revenues would climb 20% this year instead of the fall-off in revenues we have seen.
Paul |
