Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Bruce Cullen who wrote (65399)	10/8/1999 10:58:00 PM
From: kendall harmon	Respond to of 120523

HIFN--important article here <<Hi/fn Shares Plunge as Company Warns on 1st-Qtr Sales (Update4) (Adds analyst comment. Updates with closing stock prices.) Los Gatos, California, Oct. 8 (Bloomberg) -- Shares of Hi/fn Inc. plunged for a second day, plummeting 49 percent after the semiconductor maker said fiscal first-quarter revenue will decline from the previous quarter's. Hi/fn tumbled 36 1/2 to 37 3/4, wiping out three-quarters of its value since setting a high Sept. 8. Revenue in the quarter ending Dec. 31 will be about $10 million, down from more than $14 million in the prior period because Lucent Technologies Inc. and Quantum Corp. cut orders, the company said. The shares tumbled 29 percent yesterday before trading was halted after analyst Arun Veerappan at BancBoston Robertson Stephens said sales growth at the maker of chips for computer networking and storage equipment is likely to slow. At that time, the company said it didn't know a reason for the decline and would meet and issue a statement. ``Hi/fn or any of these high-growth, high-multiple stocks are not able to make a mistake,' said Chris Ely, portfolio manager with the $90 million Loomis Sayles Small Cap Growth Fund, which owns Hi/fn shares. ``They will be punished by investors severely.' Hi/fn's decline from its high of 151 3/4 wiped out about $1 billion in market value. The company is now valued at about $327 million. Ely said he didn't know in advance about the first-quarter sales forecast. The company handled releasing the news ``as well as can be expected,' he said. Hi/fn's fall spilled over into rival communications-chip makers. PMC-Sierra Inc. fell 10 3/8 to 89 1/2, while Vitesse Semiconductor Corp. dropped 3 7/8 to 82 3/8. Both supply chips to Lucent, the world's No. 1 maker of telecommunications equipment. Lucent officials declined to comment. Its shares dropped 13/16 to 64 3/8. Good Timing Analyst Veerappan set off the share slide yesterday when he issued a note saying that Hi/fn's rapid growth rate could slow, particularly in sales to Ascend. Lucent bought computer- networking company Ascend Communications Inc. in June. The comments spread to Internet message boards including the Silicon Investor Web site. Veerappan said he didn't have prior discussions with Hi/fn about the shortfall and gauged that sales were slowing from his own research. Veerappan is one of half a dozen analysts who cover the company, which was spun off from Stac Inc., now Stac Software Inc., in December. ``They overestimated Quantum's and Ascend's own ability to ship' products using Hi/fn chips, Veerappan said. Conference Call With its shares halted since shortly before noon New York time, Hi/fn Chief Executive Raymond Farnham held a conference call with analysts and investors at 5 p.m. yesterday. Farnham said Quantum, the No. 2 maker of computer hard drives, cut orders because it had too much inventory of its storage devices. He said Lucent's business is growing slower than Lucent previously projected. Quantum is revamping its ordering process to reduce inventories in its storage tape division. In July, the Milpitas, California-based company split its shares in into two stocks -- one that tracks the company's struggling hard-drive business and one for its more profitable computer-tape and storage business. ``For some suppliers of our DLT tape business, we acknowledge that this shift may have the effect of lowering their unit shipments,' said Brodie Keast, vice president and general manager of Quantum's tape division. Shares of Quantum's DLT & Storage Systems division fell 1 5/8 to 11 1/2 before being halted for news late in the day. Hi/fn's problem appears to be an ``inventory issue more than some major flaw in the business model,' Loomis Sayles's Ely said. The company's position in the market for so-called virtual private network equipment, which gives businesses a secure section of the Internet, ``should be a very high-growth area in the next several years,' he said. Veerappan cut his rating today on Hi/fn shares to long-term ``attractive' from ``buy,' and slashed his fiscal 2000 earnings estimate to 87 cents from $1.55 and revenue forecast to $45 million from $65 million. Hi/fn's $12.5 million in revenue in its third quarter ended June 30 was more than double the $5.01 million a year earlier. Buying Patterns PMC-Sierra and Vitesse fell because the same buying-pattern issue between Lucent and Hi/fn might also apply to other suppliers, said Timothy Kellis, a Schroder Securities analyst. When an industry picks up, as the semiconductor industry has, purchasing managers realize that it could be more difficult to buy, so they order more than they need at the time, Kellis said. Then the managers have to re-adjust those inventories, he said. ``This is the first time we have seen this happen in the recent past where a communications-equipment manufacturer has a build-up of inventory of a certain vendor's components,' Kellis said.>>