Phoenix Technologies (PTEC) Message Board

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Technology Stocks : Phoenix Technologies (PTEC)

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To: John B. Dillon who wrote (2899)	11/19/1998 11:12:00 AM
From: Mark Brophy	Read Replies (2) of 3624

It's not so rosy. Although PTEC does not have much competition, they still may have a hard time holding price on the PTEC high end BIOS. I believe this is because the customers still have leverage. For example, if I was a customer I would use in house development teams and the previous Award BIOS as competition. I believe PTEC would rather sell a $2 to $3 BIOS instead of 50c BIOS. Don't forget about the Intel motherboard BIOS that costs about $0.25 and is another valid alternative. There aren't enough compelling reasons for PC vendors en masse to pay extra for a custom BIOS. Big vendors can also justify producing their own BIOS. Phoenix has a bigger problem with inefficient engineering than with account management negotiations. PTEC just presented to the AEA and we didn't get any movement in the stock price. I know Jack is being conservative, but again your question is right on the money. How come they don't say they are going to beat their numbers because of the healthy state of the industry? It would be very silly for Phoenix to say they'll beat the numbers they just set! A time delay is in order. Maybe January we'll see a "surprise" in the analysts' game. Obviously the answers are to hold price and sell their added value products like ROM Pilot and the pre boot security software. I think this strategy is brilliant, but how come the market doesn't recognize this? ROMPilot was demonstrated at Comdex a year ago and we still haven't seen significant revenue, so the strategy appears suspect. The stock price won't rise until profits rise. I believe the PICO and IP group are significant and will continue to grow, but with increased competition. Pico and IP are less than 25% of revenues and the growth isn't sufficient to offset the remaining stagnant business. I also agree with others in this thread that if these divisions are spun off they would have a significant market cap. The IPO market might not be as insane 2 years from now (when the IP group is ready to go public) as it is today. If the market becomes rational, shorting Rambus, ARM and MIPS will be a better investment than buying the Phoenix IP group. And of course, there is the cash in the bank and a perfect balance sheet. I wonder what Peter Lynch would think. Lynch would avoid technology stocks because their profits can disappear quickly. The company has had trouble for years investing their cash wisely, so the market and departing employees with underwater options have turned their attention elsewhere. If the company continues to disregard the liquidity of the shareholders' investments, the downward spiral is likely to continue. They should declare a $0.50 dividend, which would use $13m/year. They could also retire 2m shares annually and use another $15-20m. They'd still have excess cash for acquisitions.

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