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Technology Stocks : SYQUEST -- Ignore unavailable to you. Want to Upgrade?

To: Michael Coley who wrote (4566)	10/30/1997 9:48:00 PM
From: Triluminary	Read Replies (1) \| Respond to of 7685

Michael, I've got a question. I saw the word "(unaudited)" on the Syquest fourth quarter report. Aren't the fourth quarter results supposed to be audited? Is this a pre-release until the audited version comes out? Regards, mark_b

To: Michael Coley who wrote (4566)	10/30/1997 10:08:00 PM
From: Michael Coley	Read Replies (3) \| Respond to of 7685

RE: My Impressions from the SYQT Earnings Statement. As promised, here are my impressions from the statement. First, the positives: * They released the numbers much quicker than in the past. This is great! When the numbers are late, I tend to think that things are wrong. Plus, the timing this time is very good. * Very forward-looking statement. It really pulls the attention away from the bad numbers "from the past". * Although losses are fairly large, they're not as bad as they have been in the past. It seems like they're finally getting some control over expenses, but they still have a ways to go. * Rocket should not be in competition with any Iomega product. Competition with Iomega has [IMHO] killed SyQuest in the past few years. Although I think the market for Rocket is quite limited, I think they can do good with it. The key will be pricing it to where they can make money on it, lowering their costs, and lowering the price when/if they need to or can. * Upcoming advertising could be good. Compared to the money that Iomega spends (and the special ads that Iomega will be running in November and December), SyQuest's "special advertising blitz" isn't much, but it can't hurt. Now the negatives: * Gross margin is less than 2%. That's pitiful! Compare that with Intel (58%), Iomega (33%), Imation (36%), Seagate (16%), or Compaq (27%). Realize that gross margin is the difference between the sales price and the cost. That means that for a $100 item that SyQuest sells, they had paid $98 for it. You can't make money like that... * Dilution is starting to show up. They went from 53.8M average durign the quarter to 59.9M at the end of the quarter to 68.3M a few weeks later. There's a LOT more dilution coming. Don't forget that virtually all 120M authorized shares are issued or accounted for, and they're seeking an emergency meeting to raise the limit to 240M... * R&D just keeps dropping. This is no way to prepare for the future. * SG&A keeps going up. * Unit sales went up, but the total revenue went down (due to price cuts). Is it just me, or wouldn't they have been better without the price cuts? * Speaking of price cuts, more are coming. That's going to hurt revenues and margins even more, unless they have a better response to the cuts than they did last time. * Current ratio is better than it has been in the past, but still dangerously low at 1.02. Something in the range of 1.5 is good. * Inventories are quite a bit higher than they were a year ago. Is demand dropping? If unit sales only went up slightly with the huge price drops, this appears to be a second confirmation that demand is declining. * They don't plan on making money next year. And they certainly seem to be avoiding the unspoken question "When will they make money?" * Despite the improvements and massive dilution (which makes the EPS loss appear smaller), they still came in at MINUS $3.34 EPS for the year, even lower than the -$3 First Call estimate. * They're one quarter behind their "internal plan". * They've pre-announced the Comdex Rocket (again), so that's totally priced into the stock. In my opinion, this stock has nowhere to go but down. (That certainly doesn't mean that it will, though...) - Michael Coley - i1.net