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

To: Ken Muller who wrote (7712)	11/10/1997 10:24:00 PM
From: Jan A. Van Hummel	Respond to of 14577

Ken, Thanks for your response. I guess we will have to wait what comes out officially. The word that I got was that the company hired an outside auditor, not Deloitte & Touche, to investigate this matter. I have wondered why D&T was not being used, but likely an auditor other than D&T would probably give greater confort that its findings are accurate. Mind you, there is time pressure to get this audit completed by Nov 14, and I just don't know how simple or complex the process of getting a complete and thorough insight into all aspects of the erroneous reporting is. I do think though that whatever the restatement will be is similar to a one- time charge. These are sales that never were and we will probably see lower 4th qtr sales than were anticipated unless, of course, there is a pick-up in demand. We may well be treading water for quite some time, but like it or not, they have a lot of hi-tech company these days. We'll just have to hang in there. We are no so close to the option premium level that you might as well consider the stock now an eternal (non- expiring) option, which certainly is of greater value than the real options. Back to the current audit. I would expect the announcement of the audited results to go concurrently with announcements of changes implemented to get this ship back on course. Anything short of that would be a disappointment to say the least. Jan One more observation. If indeed the distributors can return unsold or non-saleable products there is the potential for abuse by the very same distributors, because they can play their own little games with the endusers and assume unlimited risks. If it doesn't work out they just return the product to S3. Essentially, S3 must have a mechanism in place to fully monitor and audit the distributors to ensure they know exactly what is being sold. Perhaps they will elaborate in the soon due audited report what mechanism is in place and what caused it to fail. As I have said before when sales rise problems have a way to disappear, but beware when sales stagnate or decline.