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To: Dale Baker who wrote (639)	3/15/1998 4:07:00 AM
From: Dale Baker	Read Replies (1) \| Respond to of 118717

SFNB - I was going to post this on the SFNB thread, but there is a resident pseudo-know-it-all over there I don't feel like arguing with, so I will post my thoughts here. SFNB is a gamble. Internet banking software and data processing is ramping up quickly, and lots of firms are jumping in. Some banks will develop systems in-house; others will turn to big outfits like HP and IBM for solutions. Others should look to established firms in the field like SFNB with a proven - albeit still young - product. Here's the positive side. SFNB has almost $40 million in cash after selling its online bank, or $3 - 4 per share. With $10 million in trailing revenues, you are paying a Price/Sales of about 6 for the actual operations. Sequential revenue growth has been about 15% the past two quarters. So assuming they maintain that growth, the Price/Sales apart from cash will fall to 3 by the end of 1998. Pretty good for a startup software company, which I consider SFNB to be now that it is not running a retail bank. Cash burn lately has been $5 million per quarter. That means they could continue for 2 years with no increase in revenue. They also break even in operations with 15% sequential revenue growth. Interest on unspent cash will add $1 - 2 million in earnings. If sequential growth exceeds 15%, they will make a profit in 1998, depending on further R&D and setup costs for their data centers. What are they worth in terms of share price? Hard to say. Since the fall from the IPO at $40, SFNB has traded in a share range of 5 - 14. They seemed to be headed back down after the last selloff (and could still be). But Friday's action bounced off the 50-day MA and lower Bollinger band. That suggests that the price will stabilize over 10, waiting for news to move up. Holding over 10 would define a new up channel; breaking 14 would confirm the old range is broken. I believe that this field is much to new to make bold assertions like HP/IBM will take it all, the big banks will do it all in-house, a small innovator like SFNB will make billions in five years, yada, yada, yada. No one knows yet. But I'm increasing my stake in SFNB on Monday and setting a close trailing stop. If SFNB drops, I'm out and I keep watching it. If the share price stabilizes here, the odds are good for a move to 15 or better later this year. Do your own DD and invest accordingly.