Andrew,
your concern over the level of sales (and resulting earnings) in Q4 is certainly valid, but if you deduced this from the 424B3 you are acting on old information. AXC disclosed the lower backlog figure at 9/30/96 in the Q3 10Q filed on 11/6/96 and made the following comment in that filing: " For all of these reasons, the Company believes it is possible that sales levels for the fourth quarter of 1996 may be lower than sales levels realized in the fourth quarter of 1995."
And of course, AXC warned us of a similar concern at the end of Q2 regarding Q3 sales, which turned out to be OK.
In the S3 amendment filed on 11/27/96 AXC (in the seasonality section) again warned: "Accordingly, sales for the fourth quarter of 1996 may be less than sales for the comparable 1995 quarter, and there can be no assurance as to the level of sales that will be attained in future quarters. "
In the same 11/27/96 filing AXC also warned: "...and expects that the relocation of certain of these facilities in the fourth quarter of 1996 will be the most potentially disruptive to its manufacturring and engineering operations."
But in the most recent S3 (424B3) update on 1/10/97, note that AXC removed the line about Q4 sales being below the year-ago quarter. That line has been reduced to: "Accordingly, there can
be no assurance as to the level of sales that will be attained in future quarters."
In addition the sentence about the facilities relocation being potentially most disruptive in Q4 has also been removed from the 1/10/97 filing.
Although these details are not conclusive, I think if Q4 had been poor, Mr. Bramson would have warned us of this in the 1/10/97 filing, in contrast to the fact that he actually removed two of the more glaring warnings and, from my reading, didn't replace them with anything else.
In addition, although I dread a poor earnings report, Mr. Bramson has consistently, throughout 1996, indicated that the real indicator of whether DST sales will take off or not will be when the DST 812 library is available, and with appropriate software. For those who require huge storage at a low cost per MB, the DST 812 is the sweet spot of the DST product line. Since it is a library that holds 256 cartridges and upto 4 tape drives it provides the most bang for the buck, especially with the new double-density format. This contrasts with the DST 310 and 410 which, I believe, held upto only 6 cartridges.
IF Q4 results are below expectations I believe that investors will look ahead to growth of DST in first half 1997. In this light, the new job postings pointed out by Gus are telling. Last Friday AXC added jobs to its web site seeking four regional sales managers for DST sales to Fortune 100 companies, a completely new market for AXC and DST. In my opinion, given Mr. Bramson's notorious conservatism, he must have very high hopes for the DST 812 and I would imagine indications of interest from potential customers. Note that in the recent filings, AXC has indicated that DST 812 shipments began in limited quantities in the second half. This indicates that some units were probably shipped in Q3 and possibly more in Q4. This may have overcome the lower backlog that was alluded to.
Steve |
