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

To: doug doan who wrote (12675)	11/6/1997 3:41:00 PM
From: CalculatedRisk	Respond to of 18263

Doug, Zitel has always underachieved every estimate I have made for them! And to think some people have accused me of "nega-hype" <G>. BTW, I think you made an error in your arithmetic. Operating Income should be: Revenues - (COGs + R&D + SG&A) = - 7.4Million (using your numbers). Best Regards, Bill

To: doug doan who wrote (12675)	11/6/1997 4:24:00 PM
From: Daniel Chisholm	Read Replies (2) \| Respond to of 18263

Doug, you sure did use "more pessimistic estimates"! First, you are predicting that Net sales decline from $5.0 (4Q results) to $4.0. Why, and why so much? They can't lose any Y2K revenue ;-), are you thinking that they might deep-six the CASD line of business? Or do you think their acquisitions are _that_ sick and still getting sicker? You are predicting royalties to decline from $0.7 to $0.3. This seems to make sense, I'd agree with any number between $0.0 and the most recently reported amount (I have no idea how fast the royalties will phase out, just that they will). Now the part that I really have trouble with. You are predicting Cost of Goods to increase from $3.0 to $3.2, even though their sales dropped from $5.5 to $4.0! You think SG&A and R&D (two other classes of expenditures) will more or less stay flat, going from $8.6 combined (Q4) to $8.5 combined. This leads to an operating income (loss) of ($7.4) (as Bill "CR" corrected). If this is at all representive of their cash burn, then look out!, their Q4 balances of $13.8 cash, cash equivalents and short term investments looks pretty threatened. Do you really think that Zitel's core business (CASD disk drives, and the acquired companies) will deteriorate this fast?? Now the next part, you predict Zitel will have interest income of $1.5. I don't see why, since 5% annual interest on $13.8 gives me an answer of $0.17. Now I understand why the CEO talked about cost cutting on the conference call - if they don't quickly cut costs, they might run out of cash before they can turn the business around. I did not realize before, just how close to death this company might be. Unrelated to next quarter, but interesting nonetheless is that Accounts Receivable for Q4 are $6.5, compare to net sales of $5.5. 106 days of sales outstanding is, ahh, attention grabbing. Perhaps we should start discussing the liquidation value of Zitel? I'm beginning to suspect that covering at $5 might be a big mistake (leaving too much money on the table). If ZITL (the stock) does not crash too quickly (i.e., it crashes slower than Zitel the company), it might make sense to not cover, but rather increase short positions in another quarter or so, if the company gets further behind the power curve. Shorts have very little to gain by covering early (profits have already been marked-to-market, so they are available today! A real profit, not a paper profit!). - Daniel

To: doug doan who wrote (12675)	11/6/1997 7:01:00 PM
From: Marconi	Respond to of 18263

Doug et al: Zitel seems to be falling between 2 to 3 points per week. I have been watching the daily order book for Zitel at Island ECN isld.com and have noted that the sell orders are at least twice the number of shares for buy orders, and often 5 to 10 times the number of shares for buy orders. This has been the case since Sept 23 except for a couple of days to date. Taking the period from Sept 29 through October 30 (Zitel conference call after the close) and drawing a line through Zitel's daily trading range chart gives a slope of 2.25 points downward per week. Taking the period from Sept 31 through to date on the chart gives a line with a slope of 3 points downward per week. It is early, but it does appear that the rate of price decline is larger now than in the last month or so. With the total volume of trading since Sept 29 being around 18M+ shares, there have been a number of turns of the float on the same news basis. This suggests to me that the gridlock from May through October has cleared now and the stock is freer to float toward equilibrium. I would assert that 10 will be a psychologically pivotal point (3P) for all traders, in the absence of any other significant event. Maybe we all could lube the mechanism of settling toward equilibrium by relating to our brokers in detail our reasons for taking our position in Zitel. I plan to do so yet this week. If the word catches on in the street, I would imagine the pace of change will pick up. Looking forward to 3P! Best regards, MDR