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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: THE FOX who wrote (15470)	4/1/2001 12:20:02 PM
From: OldAIMGuy	Read Replies (1) \| Respond to of 18928

Hi Fox, I think the thing that bothers me about NT is that even with expanding revenues NT's not been very good at turning in earnings on the positive side of the balance sheet. I don't know enough about the company to comment further on that. As you may know, I tend to concentrate my searches on Revenue and Book Value growth and assume that earnings will usually follow. If they don't, then it's time for the BOD and shareholders to ask some tough questions. Management changes are sometimes necessary. Consistent growth of revenues without earnings starting to track smacks of "ego-nomics" in the top management. It's a red flag for which I look. All that said, yes, a fat trading range or a slow pace of repeat trade orders look like a good idea. The interesting thing about the telecomm industry (I've been an active investor in the sector since about 1985) is that it's usually boom and bust. The Bell cos and other telephone companies seem to all turn the purchasing spigot on and off together. When they turn it off it's NOW! (don't they know about water hammer?) It makes for huge swings in stock prices throughout the supply chain of capital equipment right down to the chip makers like VTSS. Orders are first held up for later delivery, next they're put on HOLD and finally they're just outright cancelled. This creates a huge bulge in the inventories of all concerned along the supply chain. It's up to the managements of the suppliers like NT to be able to react quickly enough to minimize damage. However, when the Bells turn the spigot back on, they do so equally quickly and the suppliers have to be ready to react again on the positive side. So, it's a "make hay while the sun is shining" business for suppliers. A further wrinkle in this is that inventory that was built for a cancelled order ages very rapidly in the changing world of technology. It reminds me of last week's purchase of extra memory for my computer. I don't remember what the first 64Meg of RAM cost me, but I added 128Meg for just $55. 16Meg SIMM cards are worthless to anyone but the Smithsonian! Even 32Meg boards are not the right clock speed to have any value. This happens in the equipment sector of the telecomms. NT's, CSCO's, LU's inventory isn't getting any more valuable while we wait for the Bells to start buying again. Best regards, Tom