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Technology Stocks : BAY Ntwks (under House) -- Ignore unavailable to you. Want to Upgrade?

To: Doug who wrote (4485)	3/9/1998 6:07:00 PM
From: rupert1	Read Replies (2) \| Respond to of 6980

Doug: The answer is no, I have been trying to find out all weekend. The best guess is that it was the Bay CFO at the Goldman Sachs conference last Wednesday. I don't want to criticise him because I don't know what he actually said or whether he said it at the direction of others. But it was he who caused all the commotion last year by announcing after the first month of a quarter that BAY was way ahead in sales. This caused a fast run-up in the share price to 41 which led to a disappointment and a severe fall back to 24 when the actual results were announced. If he is correctly reported he said he "hoped" for a back-loaded March. These are the kind of words used by the COMPAQ CEO at a Bear Sterns conference a week or two ago. In that case they turned out to be a pre-warning of a warning. Some analysts took the same words in the Bay context as coded signal that earnings expectations for Bay this quarter are doubtful. Perhaps they took this view because warnings from Intel, Motorola and Compaq have created a general apprehension about corporate earnings in the tech sector. Michael Murphy, whose newsletter on tech stocks has a big following, publicised these cautions about BAY and about a number of other stocks. His analysis was shallow and did not add to our understanding of the seasonal factors which always create difficulties in this third quarter. Add to this that the strong surge in prices the previous week would, in any case, have produced a reaction, then you have the making of the downard momentum you asked about. Remember the sudden surge was due in large measure to buy recommendations from two major houses; usually such surges last two or three days and the share price falls back and consolidates. The TA factors are peripheral; but there are many individuals and insitutions that slavishly follow TA "signals". In other words the very rate of the descent in the share price and its breakign through trend lines, creates its own selling pressure. In my weekend posts I have tried to relate all of this to what is actually known: if what is known is true, then the share price should not go below 28 and should recover soon to a 30-33 trading range. However, if there is some negative information not widely disseminated to the public and known to a few large institutions, and if the whole market is preparing for a correction, then all bets are off. Negative information if it exists would have to be that revenues are going to be signficiantly less than predicted because of product transition problems are because customers are holding back capital expenditures on networking hardware, or that margins are going to be under pressure because of price wars. It is easy to imagine that any and all these could be true. But imagination is not analysis. I could more easily imagine that the new products are going to give BAY the opportunity to declare a nice surprise. In the old BAY we might not have been told about negative developments until they hit us in the back of the neck. But House is still a virgin and until he proves otherwise I am reluctant to believe that he would have orchestrated the cautiously and conservatively positive PR campaign he has only to have us blind-sided with a quite different actuality. Victor

To: Doug who wrote (4485)	3/9/1998 6:10:00 PM
From: Paul Fine	Read Replies (1) \| Respond to of 6980

Doug- The Nasdaq fell 28 pts today, Intel/Compaq/Motorola give warnings, the sector leader(cisco) fell over 4 pts; and you want to know why sentiment changed so fast?!? It has been posted here earlier last week; Bay has been very cautious about forecasting sequential growth this quarter. They have said the quarter is "backloaded", with the need for 50% of the sales forecast to come in during March. That is a risky scenario for anyone. Remember, it was an unexpected shortfall in this same quarter in 1996 that led to the ouster of the old management 6 months later. If we don't make $.27-.28 this quarter, there will be a big drop for a few months(IMO). Promises for the 4 qtr will be suspect until analysts can "see the whites of their eyes". This stock and these times are not for the faint of heart. We are slightly below the 50 day MA and have closed at the low of the day on two consecutive days on strong volume. That is not good. It says nothing about the strength of the company or its management; it says volumes about the strength of the stock. As investors, we need to be constantly reminded that in the short term they are not necessarily the same thing. Paul