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

To: Vanni Resta who wrote (7831)	1/7/1998 9:06:00 PM
From: Fred Fahmy	Read Replies (1) \| Respond to of 13925

Re: <<Again, though, keep in mind that the main focus of this stock, aside from the popularity of Soundblaster, has been gross margin improvement.>> Vanni, I strongly disagree. IMO, margins are not the concern or focus. Revenue is the key with CREAF. Margins have been solid and should continue to be helped tremendously by currency as you suggested. The long time concern has been and is revenue growth (which has been sporadic). Management is addressing this concern on three fronts. 1) They are growing revenue by making stategic acquisitions. The two recent acqusitions look very promissing and fit in very well. 2) They are diversifying their product line and changing their focus from being just a soundboard company to a complete multimedia solution provider (e.g. Encore). 3) They are actively pursuing strategic alliances/partnerships with OEM's. This represents a HUGE incremental opportunity beyond their current retail business. All three pieces fit very nice together but all of these strategies to grow revenue will most likely drive margins down. So what? The name of the game is maximizing total margin dollars not margin percentages. For example, Company A rev=9B margin % = 40 Company B rev=5B margin % = 50 Company B has better margins but all else equal, I'll take Company A. Despite having great margins, CREAF remains undervalued because of the lack of consistent significant revenue growth. As you said, you can only cut costs and control expense so much. Also, you can't rely on currency to continue to help costs forever. The only way to grow the value of the company is to bring in more total dollars (even if it's at a lower margin percentage). As for cash, again I strongly disagree. CREAF does have a lot of cash which comes in very handy when you are trying to grow the business. It's very convenient to be able to gobble up new revenue generating businesses without issuing stocks or taking on debt. In summary, I remain long and very optimistic on CREAF because I think management is fully aware of the need to grow revenue and they have been excuting a well thought out strategy to accomplish this mission. Good luck to all, FF

To: Vanni Resta who wrote (7831)	1/8/1998 12:51:00 AM
From: Tom Barnum	Read Replies (1) \| Respond to of 13925

>>>Anyone remember how much more the currencies have fallen against the dollar since the end of October? Singpore $ 10/11/97 1/4/98 Country (1$/yen/etc.)= US 1.5335 1.6950 Japan .01277 .01282 Korea .0016785 .001009 Malaysia .4963 .4270 Here is a chart showing currency differences between October and January. Unfortunately, without knowing more about how they do their business, we can't really figure out what the impact is on their profits. For example, say they buy a dvd drive from a japanese company, who makes it in Korea, who ships it to Malaysia for packaging by creaf in singapore. The contract for the components could be specified in any currency, even US$. You could go crazy trying to figure this out. Even if their were no loss due to devaluation of currencies between other Asian countries and Singapore, you can bet that Asian buyers will postpone some large capital purchases, such as computers. Even so, I've got to believe that most of this is reflected in the current price. A PE around 8, and nobody's suggesting that they'll lose money. In comparison, Apple Computer's share price is about the same and they're losing money. AOL is losing money, and is trading at a forward PE of over 100, and the share price is 5x higher than creaf. And both are experiencing lower margins than creaf. Granted they're in different industries, but I think it shows how undervalued this stock is long term.

To: Vanni Resta who wrote (7831)	1/8/1998 6:13:00 AM
From: Daniel Goncharoff	Respond to of 13925

Finally, after about two dozen messages full of blather, some real content. Next time please skip the prior vacuousness. Regards, TheGonch