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

To: dfloydr who wrote (856)	1/24/1998 5:32:00 PM
From: benjaminf	Respond to of 3247

To the thread, I'll be off skiing in Colo. this week. Hope to keep my eye on the thread, but this place is a bit "informationally challenged". Keep the faith. Ben F

To: dfloydr who wrote (856)	1/24/1998 5:45:00 PM
From: Noblesse Oblige	Read Replies (2) \| Respond to of 3247

HI John, Floyd, There are varying levels of institutional interest, and this is largely based on whether an investment falls into the large-cap, mid-cap, small-cap, or micro-cap area. I would categorize TFS as falling in the "small-cap" area, though there are other professionals (that obviously invest more funds than I do) that consider it to be "micro-cap." The current valuation of the company is about $ 155 - $ 160 million, it is priced at about 1.3X - 1.4X 1998 sales and about 18 times earnings. I hope that in time the "float" issue will be resolved. From the standpoint of "intelligent" corporate governance, management should do it this quarter prior to the report of the quarterly results. Such an announcement would represent an active message to all shareholders that management has a high level of confidence that the first quarter "dip" (though not severe) in consecutive quarterly sales is due solely to transitional factors. Moreover, the announcement would attract a new class of investors that monitor such things as representitive of actions in companies "on the move." To a degree, management's reticence to "toot its own horn" in the past two years is understandable given the problems it has had to overcome. Nevertheless, it has now got the goods, and its active participation in the creation of perceptive value (as opposed to the fundamental business moves all managements must deploy as part of their fiduciary responsibility to shareholders) is not only justified, but given the discount the shares trade to average market valuations, totally warranted. Aside from the perceptive change that would take place, it is clear that the shares could also use some improvement in liquidity, for reasons I have posted in the last few weeks. I was a sizeable shareholder of Cheyenne Software some years ago, and that company "courted" institutional interest by making it corporate policy to increase liquidity via regular stock splits (most usually 3:2, as CYE traded at roughly the same level as TFS, and didn't want to reduce the share price precipitously by doing 2:1 splits). Those splits, along with the regular growth of the business, resulted in huge institutional interest. Over some years, the percentage of the company's equity that was owned in that fashion got comfortably north of 50%. For now, Mr. Raefon is right, and the only real instiutional interest in TFS is Chancellor and the index funds. Given that Chancellor has been a steady seller for years, and that index funds hold the shares passively, without regard for real corporate "value", it is clear that TFS hasn't developed any institutional interest in the last several years. This doesn't have to be, but it does take some time, effort, and understanding of Wall Street to effect such a significant change. It is totally up to them to effect it. My guess is that they have the capacity to do so assuming the interest is equally present. Have a good weekend. . PS: As for someone "buying the whole company", my guess is that is the exit strategy eventually. For what it is worth, I am also of the opinion that the most logical buyer is National Semi. We will know if I am going to be right within the next year or so. After all, if the new products under development have potential markets as large as we think possible, it would be foolish for NSM to pass the oppotunity to "control" the entire package, even if they have to pay a significant premium to make it work. Anybody want to be me a sawbuck on the odds?