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Technology Stocks : CRUS, good buy? -- Ignore unavailable to you. Want to Upgrade?

To: ted quinn who wrote (5393)	3/25/1998 11:35:00 AM
From: Grand Poobah	Respond to of 8193

I have made this same argument in the past in other forums that insiders should be buying CRUS, so I find it somewhat ironic that I am now posting the viewpoint of those who argued against me at those times. I also find it ironic that I find myself defending CRUS management on this thread when I have done my share of complaining to my friends. But it just seems that almost everyone here has forsaken logic in their desire to present only the negative about CRUS and forget or minimize the positive. This insider buying thing is a good example. You guys are focusing on one facet of the issue (which I agree is true) but are leaving out an equally valid part of the equation. Yes, management should be buying up CRUS stock for themselves if they really believe it will give them a good return on their money. If they don't think so, why should we? But that is only focusing on one aspect of investing--the expected return on your money. What is being left out of the picture is risk. Why should management, even if they believe the stock price will rise, take on additional risk by buying more? They already stand to make a bundle if the stock rises based on their current positions. Their motivation to buy more is reduced because they already own a large chunk. There is a risk/reward tradeoff. They may truly believe that CRUS has a better chance to rise in price than Intel. But if it does, they will already profit without buying any more. If it doesn't (and nothing in the stock market is certain, even if you have insider knowledge, there are a lot of factors outside your control) all they have accomplished by buying more is increasing their risk. It is the same for you and I. Take any stock that you believe strongly in. Why aren't you investing everything you have in it, mortgaging your home and family's future? Don't you really believe in it? Of course you do, but there is a point where you believe the expected reward balances the perceived risk, and that is the point to which you have chosen to invest. Diversification is an important part of investing because we do not have perfect information about the future, no matter how strongly we believe in a particular stock. I believe the same is true for CRUS management. What I am saying here is not intended to completely disagree with what you guys have already said. I am simply trying to present the other half of the picture. Oh, I also wanted to add one more thing about layoffs. One negative I forgot to mention is how they destroy employee loyalty and morale. I think this is what has really hurt Cirrus more than anything. The industry is populated with former Cirrus employees who have left by choice, and the productivity of those who have stayed has suffered. Cirrus may not be much different than other companies in this respect, but I do think it is a consequence that most companies tend to ignore when they are thinking about the dollar impact of layoffs. G.P. P.S. I realize that it looks to this thread like I am a great lover of Cirrus management. That is not the case. I have my own beefs with them, many of which you guys have touched on. But I am still invested in CRUS, so I must confess that I still see some positives. What I am arguing for on this thread is a little moderation and long-term thinking. But, hey, I love a good discussion, so if you guys don't agree with me, I must admit it makes things more interesting.