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Technology Stocks : Copytele - Another XEROX in future -- Ignore unavailable to you. Want to Upgrade?

To: Ken G who wrote (1045)	11/5/1997 12:21:00 PM
From: Brad Zelnick	Read Replies (2) \| Respond to of 1320

Ken G, as a "value" investor, I watch this thread with great interest. I believe you have made some cogent points: >>>What would the "unimaginable" effect be on the price of this Company stock if they really were to sell their products, as some have conceded to.<<< One effect would be that the "market" would have the opportunity to price Copytele as an enterprise. >>>Would it really take that many unit sales to put this Company in the black, even by a few cents?<<< Say they make a penny a share, with a profit margin of 1% at $2500/unit, they need to sell 22,000 Magicoms during the quarter. >>>With a downside reward for the bears of less than $5, common sense would tell me that the upside risk wouldn't be worth it for me.<<< Here's where it gets interesting. The downside reward goes to zero, and with an unlimited float, you can short lots, and never pay taxes on the gains because you never have to close out the position. The resultant gains can be used to buy other investments. (It is important that the bulls push the price up from here because the penny stock status of this issue is annoying.) Your common sense and my common sense would part company at this point. To the present Copytele has marketed nothing. Their technology is dated, and appears irrelevent in 1997-1998. They have a demonstrated track record of non-performance. They do not have in-house engineering talent capable of matching current standards. They are unwilling to spend on R+D to catch up. Their third world strategy of engineering, manufacturing, and marketing will surely garner a third world result. Hence the upside risk appears to be quite limited. It is clear that the enterprise is headed to zero, the only question is When? Any value portfolio should contain a dollop of shorted COPY. It would be nice to be able to short this stuff at that 10-20 level on a spike. The concern is that with all the shorts having covered in anticipation of the spike, there will be no spike because no one will be around to buy. Hence the upside risk in my mind is opportunity cost. If it just sits there at current price, a short will be able to collect interest on the amount of stock he has shorted. But a big move, with the ultimate course to zero is the short investors dream. So from a value investor's point of view the key is sales. This company needs sales to allow the market to price it. Make a few cents, lose a few cents, it doesn't matter. Just price it. Let the technology be judged in the market place. IMHO, if the bulls can mount a price drive, COPY becomes a fundamental short - a risk-free investment on the future. A sheet anchor to "irrational exuberance". It has a place in the outbox of all value investors. Brad

To: Ken G who wrote (1045)	11/5/1997 1:20:00 PM
From: Tim Kenney	Respond to of 1320

>Just look at the recent sentiment of some of the bears concession to the "possibility" that Copytele may even sell some of the Magicoms.< My point was that COPY will figure out a way to do something that their accountants can sign off on as a sale. I did not suggest anything about profits. Most likely, in order to book the sales, COPY will sell the Magicoms at a loss. Still, it will no doubt whoop up the bulls, which is exactly what I am counting on. >Couple this possibility with the very small quarter to quarter loss of a few cents that has been seen and expected over the history of this company. What would the "unimaginable" effect be on the price of this Company stock if they really were to sell their products, as some have conceded to.< They will still lose lots of money, especially if they properly account for their option grants. Presently, the option grants are being accounted for under old rules. Once the sheepish masses realizes that the company cannot come close to making money even if it does sell Magicoms is when, IMHO, the stock will ultimately tank for good. I am banking on it. >Would it really take that many unit sales to put this Company in the black, even by a few cents?< Yes, but in spite of the loss per unit, I'll bet they can make it up on volume.<g> >Forget about calculating PE ratios in this kind of situation. No wonder some of the bears have admitted that they fear (even for them) enough for them to cover their risked capital. < I covered some of my position, but only because I was sure I could reshort at higher levels. Which bear are you talking about that admitted fear? I still have a huge short in COPY. >With a downside reward for the bears of less than $5, common sense would tell me that the upside risk wouldn't be worth it for me.< This is the common mistake of the novice investor. They think because the share price is low, it has unlimited upside and little downside. When shorts shares by the thousands as I have, there is plenty of money to be made on the inevitable ride to zero. Tell me, Ken, if the company split the stock 10 for 1 driving the price to 50 cents, would that make the upside even better and the downside even less? (Actually, as I have predicted here before, I think the company only intends to split the stock 2 for 1.) Do you realize how foolish your reasoning is? The "value" in a stock is not derived solely by its price, but the price relative to its fundamentals. COPY has no fundamentals and therefore represents no value at any price. A special word for Ken: Unlike, Dom, who I think is probably a genuinely decent human being (albeit, quite misguided), you are a horse's butt of a different color. You attempt to distort what bears say, and "post" nonsense from "sources," recognizing full well that it is nonsense. I just hope you are getting paid for the moral sacrifices you make.