Taken from the above post:
At Com21, the proof is in the profit margins, which appear to have passed their peak. Gross margins increased from 33.4% in the first quarter of 1998 to 44.1% in the first quarter of 1999, thanks largely to cost reductions. Now Parmelee has revised his second-quarter gross margin outlook to between 38% and 39%; his original estimate was 39%.
So CMTO improves margins by nearly 10% year over year and because an analyst sees margins maybe going from 39% to between 39 and 38% the stock is getting hit. Those margins are still better than the prior year by 5 to6 points. Is INTC, DELL or CPQ doing that? I think Greenspan might have called this "irrational in reverse rotation" action in the stock. DELL went through this at the earnings release a quarter ago. It recovered back to a higher level and then the margin complaints started all over again with this quarters release.
IMHO the market is panicing over the potential for interest rate hikes and will settle down when the April data is proven to be in error, like it was last year. Until then the market will be looking for the diaster du jour to beat up. Does that mean this one is in trouble, not in IMHO, because the market over reacts to everything. Look at NETA, pushed to the $10's on news and settling out around $15 13/16 and has been up to $16.75 today, with no different fact situation then before. The market over corrected by approximately 60%. If that can be applied to CMTO, it will rebound to $33.60. Which I think is more than possible given their strategy of getting a better chip set approved than required by the DOCSIS certification people.
Yup, I just watch all day.....
Later, Dennis
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