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

To: N. Saliba who wrote (1333)	4/13/1998 11:18:00 PM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 3247

Hi N. Saliba, You have noted and asked: N.O., you mentioned you are meeting with Ms Sharp, my question is to her if you don't mind: is TFS in talks with other major phone companies like NOKIA, Ericsson--- and my next question is about the fluctuation in revenue, it is better to smooth out the numbers (even if they have to withhold unreported revenue) than to jump back and forth with revenue. Predictability has a factor in the P/E ratio the street is willing to pay for a company (you know all that--)" ______________________________________________________________________ I am sorry, but the meeting that I expected to have with Ms. Sharp appears to have gone the way of petticoats and the Model T Ford. In short, I am currently "out of style." Since my decision to vote all my shares against current management's re-election at the current shareholder's meeting, my otherwise "professional" relationship with Ms. Sharp seems to have fizzled. Accordingly, there is no likelihood that I will be able to present her with any of your inquiries. Neverthless, I will make a personal stab at it. I have no doubt that TFS has had negotiations with both Nokia and Erricson. You should have no doubt, either. Consider it a given. As for your question regarding improved valuations in companies that "smooth out" earnings results...yep, it is true. Fortune Magazine did an extensive piece on that very subject about a year ago. Generally speaking, higher predictability means a higher P/E ratio. Reason? Security Analysts push stocks where they have less capacity for embarrassment. And, embarrassment comes more often (concommitant with job risk, I might add) for some companies than for others. Usually companies can effect those "smoothing operations" relatively easily by either reversing accounting accruals, or making minor changes in the shipment of products at quarter's end. I suspect that TFS is no more or less guilty of such operations than most. Having said that, however, I am perplexed at the first quarter's numbers. Profit margins were very high given the shortfall in expected sales, and most confusing perhaps, was the fact that SG&A expenses actually showed a significant decline from the fourth quarter of 1997. I am not aware of any major employment changes (other than Mr. Sedlak, who can hardly be deemed responsible for the significant drop in expenses), nor am I aware of any significant reductions in compensation. In short...what could have caused a $280,000 reduction in SG&A from quarter four to quarter one...at a time when FICA expenditures had to go up during the same two periods because there was a fresh yearly start? (It should be noted that a positive swing of that magnitude was the difference between making and missing the quarter!) I can't speak for the rest of you...but I sure am puzzled. And, I am puzzled moreso after reading the 10K, where it is clear that SG&A expenditures are likely to rise 20%-25% this year compared to last. Can anyone on the thread explain this anomaly to me? This inquiring mind wants to know. :-)

To: N. Saliba who wrote (1333)	4/17/1998 9:17:00 PM
From: Jim P.	Read Replies (1) \| Respond to of 3247

Regarding estimates of 230 million handsets shipments by year 2000. I felt estimates were high also but an April 17, Reuters news release about Nokia stated that the annual replacement rate for handsets in Sweden is 50%. (This means one of every two buyers of a mobile phone in Sweden is purchasing another handset within the first year of purchase. The rate in Denmark is currently around 30%.) You can be sure the handset estimates take this into account but it does not say why the replacement rate is so high. Jim