Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Spectrum Signal Processing (SSPI) -- Ignore unavailable to you. Want to Upgrade?

To: joseph T. Drago who wrote (370)	12/8/1997 10:43:00 PM
From: pat mudge	Read Replies (3) \| Respond to of 4400

[General discussion] <<< They peaked at an IBM 40+ million dollar contract (Canadian) . The contract was not repeated and this years sales were flat for the company had to generate sales to replace the loss of the big IBM contract.>>> I see this as a hidden plus. Most who look at the financials see two flat quarters and feel disappointed. Those who know the IBM numbers weren't included in those figures know the company's been growing in spite of the lost business. In other words, when comparing last year's numbers with this year's, factor out the IBM revenues and see what growth you get. <<<They did a good job in other areas but lost the foundation. Now it seems that a foundation may be possible in the expanding DSP arena but it's uncertain just what role SSPIF will be playing.>>> I can't speak to whether Spectrum should have fought for the IBM business. It's never been an issue as I certainly didn't invest based on some legacy products. I am pleased, however, that the company has decided where to focus and is setting goals and structuring itself to succeed in those areas. I see them as the premier third-party supplier of DSP expertise world-wide. It's a new industry. They're very well positioned. I also like their emphasis on communications (both highspeed RAS and cellular base stations), and on test measurement, medical imaging and defense (radar-sonar)solutions. If TI is reorganizing itself to supply the world with DSP cores, SSPIF is doing the same with DSP boards and customer-specific solutions. <<<If I had Mr. Jinks on the phone I would ask the following questions...What are your formal projections for sales and earnings for 1998, 1999 and the year 2000.>>> Our techniques are different. I would never ask a CEO for projections. I would first do my homework, come up with my own estimates, and then ask how he felt about them. Whenever I've done this in the past, primarily with Amati, I've been treated with respect and always been given a clear response. To be honest, I wouldn't invest in a company if I thought the CEO threw projections around at random. <<<How many firms are presently following your firm with a buy reccommendation.>>> Again, it's easy enough to do your own homework. I believe there are three who covered at one time: Craig Sultan at Unterberg, Jason Zandberg at Pacific International Securities, and Charlie Robbins at Penn Merchant. I've spoken with Sultan and Zandberg and both say they may cover again --- Sultan's waiting on proof of Spectrum's wireless base station and RAS products, and I'm not sure about Jason. I got the feeling his report was gathering dust somewhere. <<<Do you expect any formal support from TI as they announced earlier this year that money would be coming from them to support other companies in the DSP arena.>>> I don't know where SSPIF stands with TI regarding financing. As for the TI-H&Q investment fund, I understand this is for start-ups and Spectrum certainly isn't that. I've been told the relationship between TI and SSPIF will become stronger in the near future. I didn't press as to what this means but I know from both CEOs that the two companies are working closely together: Engibous mentioned Spectrum in his Montgomery Tech conf address, and Jinks reiterated the relationship during our conversation last week. <<<How many news releases have been released recently announcing actual contracts with dollar amounts for near term business? I'm hoping to see some business which would be repeatable and thus a foundation can be laid without needing new technology to replace the old.>>> I hear what you're saying and my first reaction is if you want an investment with a solid foundation of repeatable sales, you'll have to look at the TI's of the world. Young companies in leading edge technologies can't offer this kind of foundation this early in the cycle. The multi-million dollar repeatable contracts take longer to develop and cost more per share. This is why you can buy SSPIF at $6 and not $60. Young technology companies are almost like biotechs. You have to believe in the products, believe in the management, believe in the market, and then build your position according to your tolerance for risk. I'm banking on Spectrum's early lead in the third-party DSP field, on their strong management team, including their recent acquisition of Ron Wages from TI, and on the emergence of a real-time digital world where DSPs will become as prolific as the microprocessor. I'm not terribly fond of stocks that take rollercoast rides and that's why I'm loading up in this range. Once I reach my goal --- I'm about 1/3 there --- I'll sit back and watch the company grow as a mother would a toddler. Actually, I think Spectrum's a teenager. :)) As for estimates, I've heard of $37 - 40M in revs for '97 and $100M by 2000. With only 9+M in the float, depending on what margins you use, you still get a stock price well above where it is now. Based on 25% margins --- low for software --- and 40% annual growth, you'd have a $44 stock. Do the numbers for higher margins and see what you get. <<<This issue could boom for a prolonged run or it could spurt and regroup as it did previously.>>> I'm sure you're right. There are many factors no one can predict, including the over-all market. This is not a stock for widows and orphans. <<<Hope this unsophistocated, and personally opinionated history is helpful to you. >>> It has and I welcome the opportunity to examine my own reasons for investing in the company. My goal for the next couple days is to read all the old press releases to see where the company was back in '95-'96 and then compare to where it is today. I welcome all comments. Spectrum's not a toddler, but I am. Regards, Pat