Dear Steve,
I apologoze to anyone I offend by the lenght of this response. It's a slow day, you asked, and this is what I needed to answer.
I am long on Zitel and if you're still interested in why long's are long on this stock, here's my 2 cents.
I was introduced to Zitel back in October by a friend who doesn't bring me tips very often, but when he does he's been accurate in his predictions, within very acceptable limits plus or minus. Ultimately though we're all big boys and girls and must have our own reasons and desires for doing anything. What I looked at when evaluating this deal are; Is the problem real, the dollar size of the market, the product offered by the company I'm evaluating and how does it compare to leaders in the field, last but most important, the management team. Here's the conclusions I came to;
1. The problem is real. Back in October I never heard of it but since I've seen debates in the English Parliament about it, the U.S.Senate has created a sub-committee to review the problem; Y2K conferences and a lady, Sally ? appointed Federal Spokesperson on the problem, companies like Blue Cross, FedEx and others are announcing programs that have repaired or will repair the problem. Yeah, I think it's real.
2. What will it cost to fix (how much money will be spent). A lot of people don't believe the $300BIL to $1.5TRIL figures thrown about. I think it will ultimately fall in the middle of those numbers and here's why.
a. The problem is just really coming out of the closet. Sure some companies were far sighted and may have started working on it years ago but with the life span of most US CEO's and upper management at 31/2 years and with a notorious reputation for forgetting tomorrow and just worrying about today I believe this problem has been pushed under the rug by the majority of people responsible for the problem. Estimates are less than 10 to 15% have addressed it.
b. Look at the numbers being spent by companies and estimated by experts. You've already got companies like CACI who provide Y2K services close to $1BIL in contracts.
c. But what I used back in October to project what people will spend on this is the State of Nevada. Here's a State that estimated their cost of fixing the problem at around $30MIL. Despite the fact there still isn't a contract with MatriDigm and despite the apparent bad blood that developed during their relationship (remarks by King and a programmer from Nevada-both negative) Nevada hasn't walked away from the negotiating table, WHY because they consider paying $14MIL to fix their problem A BARGAIN! ! ! !
d. So if $30MIL is what they should have paid let's extrapolate that number. Here is a state with a population density of 10 people per square mile. About one half of one percent of the U.S. population, 1.2MIL people, and their cost would have been $30MIL. Using those figures all 50 states will spend $6BIL on the problem. Now if you believe that, $300BIL WORLDWIDE is a conservative number as far as I'm concerned.
3. MatriDigm's product was in Beta testing last October so nobody had any real info on it. Today we have little more. But management's claims for the product they were developing, if achieved, would make it a hands down leader in this field, WHY, because assuming that there are and will be other solutions introduced by existing and new companies, and assuming they all work reasonably well, the company with the FASTEST solution should logically get the lion's share of the business.
Now the 1million LOC/hour is yet to be confirmed BUT IF IT'S ACCURATE it's the hands down winner. Peritus is closest with 2million LOC/per day and I think (check this out) the average across the board is around 20K LOC per month.
4. The last question I had to answer for myself was really the most important, MatriDigm's Management. With a product still in Beta, no facts about what the product will do, only predictions, who are the people making these predictions? In my opinion they are the finest assembly of management talent in any Y2K company I know of.
James Brady; 34 years at IBM, given most of the credit for the development of the System 390 which still generates $15 to $20BIL annually for IBM. This man was awarded their IBM FELLOW title. Of the 100,000 or so scientists and engineers who were eligible for this award over the years only 40 or so have received it and he's one of them.
That title is equivalent to the "holy water" being thrown on you at IBM. Use of the company jet's, membership at the private golf clubs, playing the pro/am tournaments at Pebble Beach with Greg Norman. LIFE IS GOOD. WHERE DO I SIGN UP?
Seriously this is the inner circle, you get there and you're in. Suggestions he was let go because of IBM downsizing are ridiculous. The guys up in that stratosphere aren't on the list of what you cut to save money. That's a private little club and he was a vested member. Yet he left the good life to start up a small company with an unfinished product. Well it would take an awful lot to pull my butt out of the seat of the IBM corporate jet, and I believe that's what he saw, an awful lot of POTENTIAL.
By the way over 30 of the top scientists, engineers, and managers at IBM saw the same thing because that's how many voluntarily submitted employment applications to Brady after he went to MatriDigm.
Franklin Chiang; the man has a string of inventions and technological breakthroughs going back to the 50's. I remember a friend and I buying an HP35 pocket calculator, which he invented, at a store in Manhattan back in the early 70's. The thing was a breakthrough. It was UNBELIEVABLE at the time. An electronic slide rule. I REMEMBER THE EXCITEMENT AROUND THAT PRODUCT. That man blew everyone away with it and gave the industry a new level to shoot for. I remember that and because I remember, if he says this product will have the same effect, I've got to take the shot and back him.
Titow; General Partner at Ernst & Young, started up a division that ultimately generated 10% of Microsoft's revenues. The guy delivers. In addition , he eats through concrete. This is a tough, tough businesman that brings drive, focus, and incredible determination to any job. His success and accomplishments show that and people that have worked with him verify it.
So for me the only thing remaining to be seen is the product and will it deliver the promises. For me that's like saying, Clint Eastwood is making a movie, do you think it will be good? Wayne Huizenga is starting a new company, do you think it will be successful? The answer, there's no guarantees but what people have done is the only insight you have into what they might do. I'm satisfied these men are for real and will deliver the goods.
Again, you asked for an opinion and that's what you got. Do your own research, make up your own mind, but keep a close eye on it because I feel it's going to break very soon.
This stock has been adrift for some time and without any real news it has still managed to hold price. I think it's because the stock is now consolidated in the hands of people that don't want to sell, they're waiting for something to happen, for the lid to blow off, and I feel it's coming. So we'll see. Make up your own mind. This is just my opinion and that's what you asked for. Hope it helped. Sorry again about the length of this but it's as short as I could make it.
Regards,
Deep-Digm |
