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Technology Stocks : RadiSys Corp

RSYS 1.720

+0.6%

Dec 11 4:00 PM EST

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To: Eric Jorgenson who wrote (393)	2/11/1997 6:30:00 PM
From: Neil Kalton	of 1472

This reminds me of MRVC last summer. After Cabot recommended it the stock ran up from $25 to $40. When the PRST investigation was announced MRVC, along with other Cabot stocks, moved quickly down in sympathy. Even though MRVC had made no negative announcements the stock plummeted to $12. The downward movement was irrational. Those who looked strictly at the fundamentals of MRVC and seized the opportunity to invest at the bargain price now have a better than 100% return with a bullet (as the stock is one of the few good performing networking stocks in 1997). Today, RSYS and PRST moved down in sympathy with the CTN. There seems to be no other explanation for the large decline of both stocks on the same day with no news coming from the companies. I compare RSYS to MRVC with one difference - the overhanging cloud concerning the inventory allegations. This is a concern, yet the company has assuaged my fears by THREE times issuing press releases that there is no merit to the allegations brought against it. Once this issue is cleared up positively (and I'm knocking on wood big time over here)the fundamentals will take over. RSYS has convincingly beaten estimates every single quarter since it has gone public. It is managed by a handful of former employees from Intel and Intel owns a 17% stake in the company. Earnings are expected to rise 38% year over year. As for the analyst who predicts $1.80 for FY98, I don't know what he's smoking. I think it is very hard to predict earnings for RSYS for the next quarter (look at the vast difference between estimates and actual results during the last year) yet alone the next year. I would love to know the analyst's confidence in his '98 numbers - I bet not very high! Sorry for the length and wordiness of this post. I think I'm writing this more as therapy for myself (trying to remind myself why I didn't sell for a 3 month 90% profit last fall). Anyway, I believe it was Peter Lynch who commented that the stocks that bring you the most heartache often turn out to be the most rewarding. I'm hoping my (and everyone else's who has held through this rollercoaster ride) patience and courage will be rewarded over the course of the next few years. -nk

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