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Technology Stocks : Zitel-ZITL What's Happening -- Ignore unavailable to you. Want to Upgrade?

To: Druss who wrote (12511)	11/2/1997 7:14:00 AM
From: John Kratus	Read Replies (3) \| Respond to of 18263

Druss, At this point, the non-y2k Zitel businesses are worth less than $5 per share, perhaps considerably less. The only thing holding ZITL (the stock) at current levels is speculation on MD's silver bullet. If Zitel were to sell its "crown jewel" investment in MD, surely ZITL would drop like a rock. As you say, Zitel may have no choice with the wolf at the door. And some ZITL longs may even look at this sale as an opportunity for Zitel to make future high-tech acquisitions for its future beyond 2000. But if you look at what happened the last time Zitel received a $25M windfall from the Caymans, you'll see than giving this management more money is like pouring it down a rathole. Regarding Nevada as a potential source of income, I wouldn't count on it. If the work there is truly ongoing--no one seems to know--then Zitel has probably been receiving small payments from Nevada as certain portions of the project are completed. No one on this thread has mentioned it, but this may be the source of the y2k income that was so small that Jack King reported it as "none that would show up." Nevada received a huge discount on its y2k remediation by agreeing to be the test site for a no-name start-up, and Zitel has to pay royalties to MD for the use of MAP2000. Zitel will be lucky to break even in Nevada. Finally, your idea that Zitel might sell its MD stock started me thinking about the valuation of MD and y2k stocks in general. Why didn't any of MD's VARs buy MD stock? If Northrup liked MD's MAP2000 so much, why didn't it just make a bid to buyout MD? Or if MD wasn't for sale at any price (hard to believe), why not buy Zitel as a proxy? Before Zitel bought its stake in MD, MD shopped its technology around to all of the big software and computer companies. IBM wasn't buying and turned MD down. Microsoft could have placed a y2k bet on MD for a pittance but chose not to. The only company that MD could find that would pony up a few million dollars was an obscure storage company with a dying franchise. But that was then. How about today? Why doesn't AnswerThink put its money where its mouth is and buy the "best of breed"? In fact, why has NO y2k company (public or private) been acquired by a larger company? Surely, IBM or EDS or Microsoft or any of the big accounting firms would takeover these small y2k companies if there were billions to be made by doing so. Here's why they haven't: because if a large company were to buy all the stock in a y2k firm, there would be no "greater fool" to pay more for the stock. Big business is in the business of making money. Clearly, they have concluded that there is no money to be made by purchasing the assets of y2k companies at the absurd valuations given in the current market. Therefore (to conclude a long-winded post), Zitel's stake in MD is worth a lot less on the open market than WS values it as a part of Zitel. John BTW, is it pronounced ZI-tel or zi-TEL? My prediction for Monday's high = 14 7/16