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Strategies & Market Trends : Steve's Channelling Thread -- Ignore unavailable to you. Want to Upgrade?

To: Bosco who wrote (10562)	1/25/2001 10:14:23 PM
From: Wayners	Respond to of 30051

"Inventories increased 376% over the fourth quarter of fiscal 1999 to $19.3 million, which included $1.6 million of inventory at the company's distributors. JNI had projected continued growth in inventory as it prepared for higher volume shipments of Emerald PCI products." This is what the press release says. Inventories are a red flag if they are increasing faster than sales. Inventories increased by 376% versus 113% revenue growth. Having this inventory increases the risk of having to write-off obsolete inventory if it somehow becomes obsolete. Emerald IV is supposed to start shipping in Q2...so they've got to get rid of the Emerald III stuff before then or they're going to get stuck with it or having to cut prices dramatically to get rid of it. They have an entire quarter to sell $19.3M of inventory. Sales for this just past 4th quarter were $30.4M and 1st quarter guidance is for the revenue to be 40% to 50% over last year's revenue. 1Q Revenues last year were $18.5M so management says next quarter's revenue will be between $25.9 and $27.75M. Clearly the $19.3M in inventory is below both of those figures so unless management's guidance is wrong, the inventory build is completely justified.