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Technology Stocks : Echelon Corporation (ELON) -- Ignore unavailable to you. Want to Upgrade?

To: pranadude who wrote (3014)	7/20/2002 10:45:02 AM
From: Ted The Technician	Read Replies (1) \| Respond to of 3076

Institutional investors might initiate with a SELL. Ever notice that few brokers ever initiate coverage with a SELL or HOLD? Institutional investors might have looked briefly into the company but decided to move on rather than "initiate coverage." The options expense would affect ELON's price dramatically. It would change ELON's earnings from a profit to a loss. SUN's price dropped by a quarter after announcing that it will make a loss rather than a profit for next quarter( thestreet.com. The earnings/sales multiple for ELON would evaporate once it reports losses. The CEO of CY came out against expensing options. His reason was that these options are the drivers behind Silicon Valley. I don't agree with his point of view. I see these options is his way of getting rich at the expense of unaware stockholders. Cypress is giving away options and not telling shareholders because the published earnings do not account for the options expense. I would not be holding onto a stock for the next five years if I found out tomorrow that rather than making $0.12/quarter that stock will now lose $0.07/quarter. What used to be 50%+ gross margins would drop to around 35% gross margins (which is more normal to what I would expect in ELON's line of business) after options expenses. Stocks typically head towards book value or less than one times sales when they start to report losses. In ELON's case, book value is about $4.5/share. Its price per sales is currently around 5 - one times sales would bring the price to around $3/share. Be sure the weigh the risk/rewards here.

To: pranadude who wrote (3014)	7/20/2002 3:55:55 PM
From: Ted The Technician	Read Replies (1) \| Respond to of 3076

>>I believe that ELON will not be affected by a change in option laws more other high tech stocks. Did some digging into EBAY's option expenses. Its CEO is OK with expensing options. ( "In response to an analyst's question, chief executive Meg Whitman said eBay would be willing to treat stock options as a business expense as long as a fair and standard method of valuing the options could be applied. " biz.yahoo.com ) No wonder. I estimate eBay's option grant expenses this last quarter would have been around 7% of its revenues. Its earnings this last quarter would have dropped from $0.19/shr to $0.12/shr. Compare eBay's number to ELON's expense of 23% of revenues. I think ELON would be impacted more than eBay when options are expensed.