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Technology Stocks : THREE FIVE SYSTEM (TFS) - up from here? -- Ignore unavailable to you. Want to Upgrade?

To: Doug Meetmer who wrote (821)	1/22/1998 11:45:00 AM
From: dfloydr	Read Replies (1) \| Respond to of 3247

Doug, Back of the envelope (actually a utility bill) calc: $84 mm revenue for 1997 x 130% (their projection) = $109mm +/- for 1998. $109mm times say 19% for 1Q98 = perhaps $20-21mm. That would be down $5mm from 4Q97 but still look pretty good year over year. And remember after the 3Q97 conference call we all thought they were telling us the 4Q97 woul be flat, and instead they delivered $25mm. Add to that their statement that wins in hand start coming on line in 2Q-3Q, China coming on line in October, and I see this as a glass half full and getting fuller. I note that TFS did not warrant even a mention in the Phoenix papers this morning. I am surprised. That may be our real problem here - small enough not to show up on radar. Floyd Russell

To: Doug Meetmer who wrote (821)	1/22/1998 11:48:00 AM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 3247

Hi Doug, Cynicism isn't illegal. However, management did an effective job of explaining the reasons for the change in revenue characteristics, and I am not concerned with the first quarter's numbers. I haven't spoken to the company following the conference call, and to a degree I am flying blind, but it is reasonably clear to me that we can expect first quarter revenues in a range of $20 - $22 million. The reason for the lack of "sequential" quarterly growth is transitional, and clearly was what Mr. Buchanan had in mind following the last quarter during the conference call. (From an analyst's perspective, you should note that on the margin, $ 1 million in revenues works out to about two cents a share in "net." Thus, even the range indicated above has the potential for a four cent swing in the reported profits!) Nevertheless, he gets to see the book of incoming orders while we do not, and I have no reason to disbelieve his judgement that following the next couple of months, new programs will be accelerating the revenue growth. Doug, lots of companies have seasonal business flows (think of the major retailers, for example), and their shares are analyzed on an annual basis rather than a quarterly one. I am unconcerned about the change in the revenue flow from the standpoint of fundamentals. On the other hand, I am very interested in why such a conservatively managed company has chosen this moment to expand capital projects $ 14 million in one year (expanding all their existing manufacturing facilities as well as adding yet another one in the space of one, 12 month period!). Perhaps Mr. Buchanan sees the future...and it works. You know I have been critical of this management in the past on communication issues (among other things), but there is no reason to be negative following this call. Other's may show their lack of financial acumen by selling on "the good news," but it is obvious from the actions of management that the "good news" is in the process of getting much better. In my judgement, the shares currently represent the best price/value relationship in all the time I have owned the stock (with the exception of the last two weeks in December/1997). The 10-K will be issued shortly, and I have no doubt that there will be substantial additional guidance for us in it. Just be patient, Doug. They are going in the right direction.