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Technology Stocks : S3 (A LONGER TERM PERSPECTIVE) -- Ignore unavailable to you. Want to Upgrade?

To: Ken Muller who wrote (7411)	11/5/1997 4:13:00 PM
From: Jan A. Van Hummel	Read Replies (2) \| Respond to of 14577

Ken, This is no simple accounting error. I have been on management's side during the trying past weeks accepting the risk inherent to the environment the company operates in. I do believe the current reaction to the announcement is overdone. It should not have been more than 1/4 or 3/8 at the most, but given the recent performance I am not surprised. If this is the last of the surprises, then the stock is highly undervalued. However, this is all immaterial. What is material is that I, like many others, make investment decisions on information provided by management. The timing of purchases and sales is closely tied in with the dissemination of any type of news by the company. Whether the accounting error is inadvertent or not has no relevance. As part of its responsibilities management is charged with the duty to have the proper checks and balances in place to ensure that the accounting procedures it has elected to follow are followed. Failing is this area is a serious dereliction of duty. Whether GJ knew about it or not doesn't really matter. What matters is that it happened on his watch. Also, if the error was inadvertent, it is one thing; however, if not, it would be fraud. It's my opinion that this is likely a screw-up in the organization and more the result of ineptitude and lack of sufficient checks and balances, but it cannot go unaddressed. A change is necessary, if only to restore the investment community's confidence in management. Mind you, I still believe the company is undervalued and that the recent moves are an overreaction still assuming no more surprises. I do hold the company responsible though for the fact that it misrepresented its actual performance and thereby caused me and others to make investment decisions that led to realized or still to be realized losses. While a class-action suit may well happen, I don't there will be much recovery possible. JMHO Jan A. Van Hummel

To: Ken Muller who wrote (7411)	11/6/1997 4:26:00 PM
From: Ken Muller	Read Replies (2) \| Respond to of 14577

To All: There is one additional item which I did not mention the other day. It concerns the issuance of $100 million of convertible debentures which I believe occurred during the period of inaccurate reporting. Since these instruments were notes issued at below market interest rates (tied with the incentive of being able to convert into stock at $19) the holders may be able to ask for the offering to be voided. I believe the rules governing the issuance of notes are quite stringent. This would, potentially, have a bigger impact than a class action shareholder suit which usually settles for pennies on the dollar. Should a suit by the note holders prevail, S3 would have a serious problem. They would not be in a position to re-issue $100 million in notes. Their only option would be to buy back some or all the notes with available cash (improbable), offer above market interest rates on the outstanding notes (interesting) or proceed with a backruptcy protection plan (probable). IMO, the key to resolving this mess is a CEO who is the best in the business. He won't come cheap. Any comments? Ken