To: Johnny Canuck who wrote (27746 ) 8/25/2000 12:37:26 PM From: Johnny Canuck Respond to Pumatech (PUMA) 21 7/16 -2: A sell-the-news reaction to a good quarter is probably causing some head scratching at PUMA headquarters this morning, but given the 24% advance in the days leading up to the release, some profit taking was inevitable. Nevertheless, PUMA did leap past estimates again by posting a loss of $0.08 per share, three cents narrower than consensus. Revenues of $9.03 mln were also better-than-expected, and represented annual and sequential growth of 52% and 12.6%, respectively. Two developments regarding revenues should be noted. First, the balance sheet shows deferred revenues jumped 18.4% sequentially, providing good visibility into next quarter's sales. Secondly, throughout the quarter we had repeatedly heard grumblings of tight semiconductor supply, specifically flash memory chips. The shortage had positive implications for flash chip makers (ATML, SSTI, SNDK), but negative implications for the cell phone and PDA makers that PUMA's products address. Despite the shortages, PUMA still was able to surpass consensus revenue estimates by about 6%. Notebook revenues did show some weakness attributed to component shortages, but this area is not a strategic focus of the company and accounts for only 8.6% of sales. We're not sure how severe the chip shortages actually were during the quarter, Wall Street tends to exaggerate, but PUMA's ability to execute in the face of adversity is encouraging and the more recent talk that the supply pinch is easing is even more encouraging. PUMA is still investing heavily in R&D (63.8% of Q4 sales) and is incurring integration-related costs from the ProxiNet, NetMind and Dry Creek acquisitions, so profitability is still 1.5 - 2 years off, but PUMA is clearly executing their plan and we expect further upside to the shares over the next few quarters. - Matt Gould, Briefing.com
