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Technology Stocks : K-Tel (KTEL) Have the cheesy '70s records come to an end? -- Ignore unavailable to you. Want to Upgrade?

To: Louis Riley who wrote (180)	4/17/1998 12:41:00 PM
From: Deliveryman	Respond to of 3203

OK, Let me start with some raw data I get from Media General Financial Services. The revenues you mention do seem good, but I need to look at the resulting earnings per share. Earnings per share FY 6/97.......FY 6/98 1st Q .22--------.30 2nd Q .45--------.11 3rd Q .13---------n/a 4th Q .01---------n/a total .81---------.41 Now this company has never done .40 in the last two quarters, ever. I don't think the street is even doing earnings estimates, but the company is not talking about blow out qtrs... You would have to believe that these guys are gonna do an average of .20 EPS per qtr. during the last 2 Qs just to meet what they did last year. So for the 2 qtrs you mention, their revenues (2 qtrs combined) are up from $32.7m to $47.2m, and yet the EPS (combined) is down from .67 to .44 Does that say anything to you? EPS is kinda like a lie detector to me...If Revenues are rising, and earnings are going down (imagine that they just do last years earnings from the last 2 qtrs, imagine that they double earnings from last year, they still fall way short) Remember the Fiscal qtrs mean that 2nd Q is Christmas... thats past us for FY98. But thats talking about valuations. No one really wants to talk about them, or if they do, they want to compare them to Internet companies... KTEL is NOT an internet company and to compare them to YHOO, XCIT etc. is kinda like wishing on a star. Now just a quick comment on this NEW BUSINESS.... It is a business that AMAZON hasn't made money on...The costs of this new business is higher than most people think. First there is the tech... Remember the IBM commercial where the company gets way more hits than they thought they would get, and the server is down. Unless you have a really wired HOOK (ie search engines), you need to generate hits by buying web advertising. Television hasn't really worked. This Website is probably gonna be an expense that is twice what they think it is. Remember these guys are NOT DELL or AAPL. So what if they generate even a Million dollars a month in revenues from the website, I think they will discover the profit margin is even tighter than the 2% they have now. It might even cost more than it generates (Case of AMAZON) This reduces the EPS even more? Oh my.... The street forgives neg EPS for internet companies because they have never had good EPS, but KTEL might be looking at going from positive to neg.