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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (3972)	7/18/1999 3:11:00 PM
From: Mike Buckley	Read Replies (2) \| Respond to of 54805

Lindy, I had no idea you were so fascile with the numbers. You've been holding out on us! If you take the last quarter at 41, this quarter at 61, and project the next two quarters at that jump, 50% per quarter, you get 41, 61, 91.5, and 137.25, total 3.3075 I ignore the $.41 of last quarter. Instead, I focus on the pro forma $.60. I assume the company's info will again show those pro forma numbers which indicate what the profits would have been without the infrastructure. (The Ericsson deal closed last quarter but Q bore the operating losses of the infrastructure for part of the quarter.) Once we have the pro forma info, we'll have a better handle on the current quarterly growth rate. I will be shocked if the company increases EPS at a quarterly rate of 50%. Elated, but shocked. Instead, I'm using the run-rate of $2.40 based on the $.60 (pre-split) pro forma rate. I'm assuming a 45% annual growth rate, yielding a 12-month EPS of $3.50, higher than the $3.31 you project but also one quarter further out. Going further, I think there's a flaw in your premise regarding the PE. I don't expect the current trailing PE to hold. The current price of the stock assumes the earnings will improve once the infrastructure business is sold. If you are going to assume the PE will be about the same as today, you might want to consider using the run-rate PE, which is about 66. If the run rate does increase 45% annually, as I think will happen, I also think the run-rate PE will expand to at least 75. If that happens, we'll see a price of about $260 a year from now. Though that's a lot lower than your expectation of $450, I think your expectations could be achieved if the momentum crowd takes control. Of course, Monday evening we will have a different pro-forma run rate. At that time, I'll run the numbers again. --Mike Buckley