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

To: Don Mosher who wrote (48091)	10/19/2001 8:00:29 AM
From: Bruce Brown	Respond to of 54805

Quality post on the dilemma of GG, Don. A member of the first manual's example gorilla gamer's portfolio, Checkpoint Software, announced their quarterly earnings this AM: checkpoint.com ===== Check Point Software Technologies Ltd. Reports Financial Results for the Third Quarter 2001 Record Net Profit Margin of 63% REDWOOD CITY, Calif. - October 18, 2001 - Check Point Software Technologies Ltd. (Nasdaq: CHKP), the worldwide leader in securing the Internet, today announced financial results for the third quarter ended September 30, 2001. Net income for the nine months ended September 30, 2001 was $244.8 million, or $0.95 per share (diluted), an increase of 75% and 79% respectively over the same period last year. Revenues for the first nine months of 2001 were $405.1 million, an increase of 42% over the same period last year. Net income for the quarter was $74.3 million, or $0.29 per share (diluted), compared to $61.6 million, or $0.23 for the third quarter last year. Revenues for the quarter were $118.0 million. As previously announced, Check Point experienced an interruption in business following the tragic events of September 11th in the U.S., which resulted in an estimated revenue loss of $15-$20 million for the quarter. The company generated positive cash flow of $78.2 million in the third quarter, bringing total cash and interest bearing investments to $944.2 million as of September 30, 2001. ===== BB

To: Don Mosher who wrote (48091)	10/19/2001 10:37:01 AM
From: Judith Williams	Read Replies (3) \| Respond to of 54805

Don-- buy low, sell high Terrific post. Many thanks. You helped clarify some issues that had been nagging at me during the recent discussion of valuation. One of the problems I have with the valuation criteria discussed so far is that the solutions are somewhat hermetically sealed. If we accept that the economy and the stock market in particular act as as self-organizing dynamic systems, the market is itself made up of a network of subsystems. The closest analogy I have at hand is a study of a few years ago that looked at lion populations in the Serengeti. Some prides had a competitive advantage and flourished. Others got below critical mass and saw their territories challenged and their head lion defeated. This would, I think, compare, to an individual company's competitive advantage and where the pride is with respect to its "developmental curve"--in effect, where it is in terms of its "life cycle." But all prides suffer during a drought--the strong can hold on a little longer but eventually they too get parched. So that's the difficulty I have with the intersection of valuation concerns and GG. They are primarily company focused. We all accept the notion of TALC. We all accept that there must be some way of valuing companies--to get a notion of whether we are overpaying or finding a bargain. But even our concepts of ROIC and WACC--which seem to offer at least the prospect of a metric that levels the playing field--pay scant attention to macro elements. They build in a nod to the larger market ecosystem only in the risk-free rate and the tax rate. We can chart how a company is doing relative to its past performance if we use the same criteria over time. We don't get a clue about whether those results are company-generated or the product of some larger convergence within the market ecosystem. If we accept that technology is itself subject to a life cycle, I think we also must take that assumption a step farther and consider a follow on assumption--that the market ecosystem as a whole is subject to cyclicality. Right now our metrics for valuation are intrinsic--having to do with competitive advantage and where the company is in the TALC. I would argue that what we have seen over the last year and a half has little to do with either, and everything to do with systemic factors for which we have few metrics and even fewer insights into the interaction of the subsystem and the wider environment. Judith