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Technology Stocks : Stratex Networks, Inc. (STXN)
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To: Ausdauer who wrote (669)3/5/1999 11:39:00 AM
From: Rob Preuss  Read Replies (1) of 1762
 
Acquisitions represent (one form of) growth. Since
we shareholders aren't seeing any dividends, we
expect DMIC to reinvest earnings and generate growth.
Now they could save their pennies until their piggy
bank is large enough to make a purchase, or they
could issue debt to make the purchase now and
then use their earnings to pay down that debt.

DMIC could use the $65M to acquire a small company
whose product(s) fills a hole in their product line.
There's a big synergistic effect when a customer sees
s/he can buy most equipment from a single supplier.
Customers like multiple vendors/sources for the same
(or similar) equipment but they really don't like
having to integrate different equipment items
from different suppliers/vendors.... and they get
added value if they purchase an integrated suite
of equipment from one (of several) vendors.

E.g., many years ago I bought a JVC stereo system:
tuner/amp, cd player, dual cassette... these various
system components worked together as a unit controlled
by a single wireless handheld remote... I was glad that
other companies (e.g., Sony) made similar systems, as I
could compare features/prices and I felt that the
competition kept prices down for me; but I still bought
all my components from a single vendor. More importantly,
if JVC didn't have one of these components... I probably
would have bought all my components from another vendor.

DMIC has good management. Whatever they have in mind
for that $65M, I trust they will not squander it.

Rob
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