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Technology Stocks : Adobe (adbe) opinions -- Ignore unavailable to you. Want to Upgrade?

To: country boy who wrote (2136)	2/25/1998 11:51:00 PM
From: Michael F. Donadio	Read Replies (2) \| Respond to of 3111

I'm still with you and Adobe. Thought you might be interested in an analysis of techstocks by Michael Murphy of the California Technology Newsletter where he mentions Adobe. According to him Wall Street needs to include a new ratio in its analysis of techstocks -- one that takes into account the amount of money being spent on research and development. He calls this ratio "growth-flow". Companies like LSI Logic and Adobe actually spend more money in research and development per share, then they report in earnings per share. For this Wall Street punishes them. If they stopped the research and reported higher earnings, their stock values would rise rapidly. Their growth, however, would not. In the long run their growth through research and development leads to increase earnings and is truly the mark of a vibrant technology leader. See: search.nytimes.com Q. What are some good growth-flow companies? A. LSI Logic is a semiconductor company that has had earnings of about $1.15 a share for the last 12 months. The R&D per share is $1.30 -- they actually spend more on R&D per share than they're reporting in earnings. The management could slash the R&D and report much better earnings, and Wall Street would undoubtedly run the stock from where it is today, which is about a little over $20, up to $30. But that would be a very short-term thing to do. Instead, LSI Logic will invest the money, produce new products and drive up earnings. The stock's going not only to $30, but to $40 or $45. We actually have a target of $50 for that stock. Many other companies that are dominant in their niches are spending more or almost more on R&D than they report in earnings. They include Credence Systems, which makes semiconductor testers; Adobe Systems, the software company, and Diamond Multimedia, which makes add-on boards for graphics and modems for computers. Go Adobe, Michael