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To: Dale Baker who wrote (317)	12/6/1997 12:49:00 PM
From: jgideon	Read Replies (1) \| Respond to of 118717

Another comment on NMGC. The Fool snapshot numbers have been updated to reflect reality (or the street current version of it). hoovers.com Yet there still remains a discrepancy. Take the 0.53 in TTM EPS, and assume that NMGC hits its number for 1/98. That gives 0.21 vs 0.04 year ago and an estimated 0.70 for earnings in 1/98. Why do the analysts give only an average of 0.60? This must be due to some some leftover year end estimates by analysts (only 5 on this stock at Zack's) who are not really following quarter by quarter and has not updated. Hence, the street estimate of forward PE is significantly higher than it should be. Come earnings release, a good surprise could be in the offing if folks are playing against the published year end estimates instead of looking in detail. --------------------------- From the recent 10-Q, here's one small red flag: "The Company's products are used in, and its business is dependent on, the personal computer industry with sales primarily in Asia, Japan, and the United States." and "Export sales accounted for 83.1% and 95.4% of net sales in the three months ended October 31, 1997 and 1996, respectively. Export sales accounted for 82.8% and 94.8% of net sales in the nine months ended October 31, 1997 and 1996, respectively. Approximately 71.7% and 69.8% of export sales for the three and nine months ended October 31, 1997, respectively were to affiliates of United States customers. The Company expects that export sales will continue to represent a significant portion of net sales, although there can be no assurance that export sales as a percentage of net sales will remain at current levels. All sales transactions were denominated in U.S. dollars." --> Hence, the asia problems have probably added uncertainty to the stock. With a strong dollar, their product is getting pricier and they may have to drop prices earlier than expected in the product cycle. If they have competitors that can sell denominated in asian currencies, it is a disadvantage. Another thing to note: "Five customers accounted for 16.0%, 15.4%, 14.1%, 12.8% and 10.5% of net sales for the three months ended October 31, 1997." --> That's 69% of sales to 5 customers. Loss of any one would have a significant impact. And another: "The Company expects that it may need to raise additional equity or debt financing in the future." --> To be expected from a small, fast growing company. Expect share dilution and look for good ROE. And finally, the competition: "The Company's principal competitors include Chips & Technologies, Inc. ("Chips & Technologies"), Cirrus Logic, Inc. ("Cirrus Logic"), S3 Incorporated ("S3"), and Trident Microsystems, Inc. ("Trident"). On July 28 1997, Intel Corporation announced its intention to purchase Chips and Technologies." "Chips & Technologies, Trident and S3 have publicly disclosed that they have or will begin sampling an integrated multimedia accelerator solution for the notebook PC market that would directly compete with the Company's products. Potential competition also could come from manufacturers that integrate a microprocessor with a multimedia controller. Although Intel has not announced any such product independently, its relationship with Chips and Technologies could yield some type of commercial product in the future." --------------------------- ==> Overall, the 10-Q makes a good read. Lots of discussion that is usually only in the 10-K. They are playing in a niche and seem to have gotten there first. One has got to believe that the competition will arise during 1998, but will it only slow their growth or stagnate them? The list of current OEMs is impressive. Can the bigger guys adapt to this niche quickly or is the technology of integrating multimedia acceleration and DRAM a difficult trick? ==> By no means a sure thing, but a play at least to earnings announcement in Feb 98 seems interesting. Gotta watch the competition, though. jg