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

To: Ken G who wrote (1050)	11/5/1997 4:52:00 PM
From: Brad Zelnick	Read Replies (1) \| Respond to of 1320

Ken, I'll go through your points: 1.>>>Whenever I short a stock, my broker is lending me the shares to sell short. My cash account is either reduced by the value of the borrowed shares, or I must borrow that amount (at the wonderful broker loan rate) to cover the equity value. Either way, the money is not "free". It is an asset that is borrowed and has costs just like any other loan. And if the stock price goes against me, I am marked to that difference, daily. If it just sits there you are in no different a position that the bulls, we both have lots of opportunity costs to contend with. If moves in my direction, I win, less broker loan rates or otherwise. If it moves against me, I lose, plus broker loan rates. Long or Short, it seems about the same to me. <<< I want to short. You have the stock in your margin account. You FREELY make this avialable to me. I sell it and collect the proceeds. The collateral I put up comes from other positions. (I'm not leveraged.) The cash I received from selling your stock short now starts earning interest. Either the broker gets it, I get it, or we split it. It helps to have a broker who is in this with you. It's nice when interest rates are high - you get the 'float' interest and stock prices tend to decline. 2.>>>I am not contending that if we aren't given any new technological advances in the product that this stock can go anywhere but down.<<< This technology was abandoned years ago for a reason. (Carburetors have been abandoned too. Some specialty shops still tinker, invent, and patent them, but auto makers do injectors now.) Copytele has not made the kind of R+D investment that everyone else has. Technology moves rapidly. Copytele appears to be stuck in the past. >>> Is there some change to these fundamentals in the near future that you are expecting, and the market isn't expecting, that would drive this stock to significantly less than current market valuation? <<< All the FPD competitors have made partnering ventures. Copytele has chosen to stay outside of the mainstream. The FPD budgets are now fixed. Copytele's technology is designed into their product only. It would be fun to imagine a great leap forward, but it won't happen. Even if they have a better product, there's no one to use it. In the 1997-98 time frame this becomes obvious. The massive upside risk to a shortseller from Copytele providing CRT replacement business has disappeared. The other technologies are ramping - there's neither room nor need for the Copytele solution. >>>Risk vs. Reward seems to be out of balance in your equation.<<< Do not confuse business risk and market risk. The business prospects for a Copytele are dismal. The market may perceive some far-off goal for COPY and drive the stock price up. Not to worry, this is a temporary opportunity for longs to cash, and shorts to establish positions. (With 55 million shares out and more on the way, you won't see any short squeeze.) 3. >>> What is your (or other bears) $/share limit of upside tolerance. Should the slightest inkling of a profitable quarter be set in place, don't get in the way of the stampede.<<< Look above under #2. The business risk is nil. I cannot even verify that Copytele has a plant in China, much less one that can turn out thousands of units per day. Given that, the upside tolerance is very large. The higher it goes without a verifiable business, product, state of the art intellectual property, etc., the more an upside "stampede" looks like a balloon you want to ride as high as possible, then pop. In fact at this point, I think the longs and the shorts should be working together to get this thing moving again. We need one good upside "stampede" for a last hurrah. You can get out, Mr. Krusos can get out, and we can get in - riding around on a bubble wearing golf shoes. BTW, I don't see that it is difficult to short. If the price is low, the same dollar figure goes farther. Dollar cost averaging cuts both ways. Also the cost and profit margins can be quibbled with. I used the $2500 figure that Copytele bandied about. I personally think the Magicom should sell for $250/ Max. Look at Iomega and their Zip pricing. That's where it might sell. Frankly I think that Magicom is a stupid product in 1997-98. There's much better stuff out there. It's just an excuse to install the panel. And the panel is 10 years and $100 million behind. Good luck, you ride the UP escalator, then we'll ride it DOWN. Brad

To: Ken G who wrote (1050)	11/5/1997 10:56:00 PM
From: Elliot Mausner	Respond to of 1320

Dear Ken, It seems all is not as dull as I thought it would be now that mike chen is gone. Tim and Brad provided some excellent points that you rebutted quite well except considering the following point. The long and short points were perfectly presented, however, Why do you think that the magicom will suddenly be produced when an actual working model doesn't exist. And if one does, the technology is already out of date. How much upside does a camera company have that make 110 size cameras?; or full size vhs recorders?; or 19" black and white tv sets? The big question is, How much money can the company make selling out of date equipment that few people can use or want at a price higher than they care to afford? Where is the "value". Five years ago copy held great promise, two years ago they had an opportunity, now copy is just a burnt out star on its last gasp. Elliot P.S. aside to tim kenney or brad; Could you give me some tips on your ideas of playing copy short. I have never shorted any stock before and I think your prognostication of this stock play is dead on.