Brother,
Conference call explained the numbers in a little further detail: Fast ethernet sales were up 18% quarter to quarter, but sellthough
( a measure of the channel's demand for their products) was up 28%.
Unfortunately, a slowdown in OEM sales will impact the March quarter numbers, and we will not get an acceleration in total corporate sales until the June quarter. Look for this quarter to be break even from operations, though they will be in the black when counting interest income. Management indicated that it would be "easy" to grow earnings per share now with demand for their fast ethernet products starting to accelerate, but they saw that decision as "short sighted" considering the avalanche in business they saw coming. Accordingly, they will continue to invest in infrastructure, and by the sound of the call, much of that invesment will be in overseas markets. The President more or less said that she wasn't concerned about profits right now, but market share.
From the standpoint of the shareholders, today's report will be viewed somewhat disappointingly, but given the tone of recent trading, with considerable "hot money" now in the stock, I tend to agree with your view that tomorrow's trading will be unpleasant for the longs. Do not lose sight however, that the FDDI business is worth about $ 60 million or so, and the company has approximately $ 50 million in cash (and no long term debt), so with 12 million shares out, and a hypothetical trading price of $ 15 (market cap total $ 180 million) the fast ethernet business would be valued at only about $ 70 million. This is *very* low compared to recent acquisition activity in this market, and, despite the disappointment with 4th quarter actuals and first quarter current estimates, ought to creat some kind of floor for the shares.
All in all, a disappointment, but not a killer. I think investors will overreact on the down side, but given a little time, such pricing will prove transient. |
