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Technology Stocks : TAVA Technologies (TAVA-NASDAQ) -- Ignore unavailable to you. Want to Upgrade?

To: TokyoMex who wrote (6521)	11/25/1997 10:01:00 AM
From: M. Frank Greiffenstein	Respond to of 31646

Tokyo, Y2K Fund is Already Open. HomeStates Fund (aka Emerald) opened up their Y2k fund for business two weeks ago. I know this because I am looking at the prospectus as we speak. They don't list any of their initial purchases, we will have to wait for the semi-annual report to get that info. Not sure where the 2/98 date comes from. DocStone

To: TokyoMex who wrote (6521)	11/25/1997 5:21:00 PM
From: Steve Childs	Read Replies (1) \| Respond to of 31646

Joe, Skip and company: Now that I've made TPRO my largest holding during the past two weeks, I wanted to take a moment to focus on two issues, hiring and valuation. 1. Hiring. I believe someone mentioned that TPRO has hired 12 tech people in the past three months (from conf call). It is understandable that in the short term TPRO was focused on raising cash and on the CD rather than hiring. However, for TPRO to achieve revenue goals a year out, they need to be hiring at THREE TIMES that hiring rate per month. I think it is something that should be watched closely. To me, this is much more important than wondering how many CD's were sold every week. 2. Valuation. Both of you, and a few others, have thrown out numbers like $45 by the end of this year or next. Help me get there. We all know that the street is now beginning to discount Y2K earnings from valuations since they are not sustainable. When you look at Red Chip's analysis, it actually seems reasonably aggressive. They are projecting that non-Y2K revs (SI rev) will DOUBLE by end of F99, from about $40 mill to $80 mill. They project that this portion of revs will generate .36 eps. In addition, they are projecting another .66 eps for incremental Y2K rev, for a total of $1.02. They attribute a multiple of 18-20 to the non-Y2K, and only 5X to the Y2K. That seems valid. Using this method, you get 20X .36 + 5X .66 = $10.50 per share. You are saying that TPRO will deserve a valuation of 4X that number, not only at year end 99 but year end 98? How do you get there? There's another way to look at this: price to sales. At a stock price of $10.5 with 24 million shares outstanding, TPRO will have a mkt cap of $252 mill. Projected sales in Red Chip review is $116.7 million by YE f99, $80 from SI and $40 from y2k, roughly. That's a price to sales of 2.16, and for SI revs only it's a price to sales of 3.15. By comparison, a systems integrator like EDS has never had a price/sales ratio above 2.15 in the past 6 years. What price to sales ratio does a company like TPRO deserve? Certainly other Y2K companies have much higher ratios, but we've pretty much agreed that that is a momentum bubble that is slowly but surely bursting. So please tell me how to get to $45, 'cause that's where I want to go. Steve