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Technology Stocks : INVX Innovex Comdex Winner !! -- Ignore unavailable to you. Want to Upgrade?

To: John R Storey who wrote (1939)	12/23/1997 3:39:00 PM
From: Mark Oliver	Read Replies (1) \| Respond to of 3029

<(1) Dependencies on Japanese and Pacific Rim sales for profits is up.> Of course nearly all their product is shipped out of the US due to the fact that a very small percent of drives are made on US soil. That does not mean that demand for the actual drives is coming from Asia. <(2) Until the disk drive makers get going again, where is the Innovex revenue coming from? DD makers will need to recover and clear their distribution channels, then start ordering parts, and the quarter after that Innovex should see some money.> You are right, we'd like to see channels and inventory cleared to normal levels, and that must be pretty near as we've seen this problem for almost 2 quarters. As far as unit sales, we are seeing most all drive makers increasing unit volume. Their average seeling price is sinking so fast, they are not making much profit, but don't confuse that with shrinking unit volume. You also want to monitor the product mix to see that higher end drives are still selling, but I see no indication they are not. We are just seeing a lot of low end systems selling with under $1000 PC's. (3) People are too short term oriented to realize that none of this will matter long term - it will all settle out. They will ignore facts like income per share is up 252% while a/r is only up 180%, cost of sales is only +192% and inventory is only up 130%! Way to run your company! Interesting that the market always stayed rational and never assigned INVX a PE relevant to it's earnings growth. The cyclical quality of storage and past burnt fingers have kept the big money from bidding up the price. Too bad really, but then we'd be seeing sevre crash today. (4) Management may see a record year in 1998, but they don't say how they see that, and due to (1) and (2) I don't see it myself. A record year is one penny over last year. Still, I believe they said how they were going to make more money this year by lowering losses on other divisions, and perhaps making profits there, as well as possibly bringing up margins at Litchfield to those of Precision Products. Beyond that, they seem to have a history of seeing the future a little better than other companies. I suspect that is because drive makers are very concerned that component suppliers don't hold up sales. Imagine a $750 drive waiting to be finished because a .27 part was on back order. Keeping component suppliers informed is the only way to make build to order systems work, especially when that supplier is the single source. Don't forget that as all these under $1000 PC's sell, a high percentage of them will be going online. Also, we will see WebTV and other internet specific devices sold. Each of these "low end" sales will drive added high end enterprise capacity. Also, it won be long before low end PC's will add a second drive. Lets hope we see a lot of digital cameras sold this xmas. I think INVX is being realistic. They have a good chance to improve revenues and earnings again in 98, even if it's not as spectacular as 97. They've been pretty honest with us so far, I tend to trust them a little more than other companies. Regards, Mark