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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: Hitch who wrote (6646)	12/6/1997 3:32:00 PM
From: Douglas V. Fant	Read Replies (1) \| Respond to of 13925

Hitch, I help Joe Dancy on the Lonestar Growth Investor Newsletter. We are placing the attached article in our next update. I just realized that it provided a clue as to CREAF's future. Let me post first and I'll explain: COMMERCE DEPARTMENT FORECAST: STRONG COMPUTER GROWTH The U.S. economy will continue to grow and will be led by high-tech companies according to a report released recently by the Commerce Department. The report predicts that the U.S. economy will not be severely impacted by the financial crisis in Asia, and predicts the economic sector expected to experience the highest growth will be the computer sector. Shipments of computers and peripheral equipment are expected to increase 30% by volume, but since the price of such goods are falling the revenue growth rate will be only around 10% according to the study. Commerce officials, while they see no impact of the Asian crisis, still conceded that the computer sector is somewhat vulnerable due to a potential increase in imports and price cutting that may result. As noted above, the uncertainty in the technology sector and of the impact of the Asian crisis is adding to the risk of holding such companies - and the price of many technology companies has decreased (sometimes substantially) from several months ago to reflect such risks. [eor]. The above US Commerce Dep't Report provides a clue as to why revenues climb only 10% yet profits increase much rapidly- the cost of components is decreasing. (Remember CREAF is predicting 10-15% growth in revenues this year- dead on with/slightly above the US Commerce Dep't prediction) Ipso facto one can drop prices yet hopefully maintain or even increase profit margins... The 30% annual growth in volume of sales of peripherals in the US should be beneficial to CREAF- especially if CREAF can provide quality components more cheaply due to local currency devaluations than US-based peripheral companies. Thus a 10-15% increase in revenues may actually disguise and translate into a larger increase in profits due to increased volume of peripherals shipped albeit at lower prices but at equivalent profit margins.... Sincerely, Doug F.