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Technology Stocks : Check Point Software (CHKP) -- Ignore unavailable to you. Want to Upgrade?

To: Danny Chan who wrote (2157)	4/29/1998 11:39:00 AM
From: S.Picker	Respond to of 7150

There seems to be three things concerning investors after the quarter: 1. Forthcoming competition from Microsoft?? 2. Weak ASPs as revenue growth was "only" in-line with estimates 3. DSO's increased from 44 days to 56 MSFT Competition: Currently Microsoft offer only very basic firewall software that doesn't compete on the same territory as CHKPF. Evidently this is a market that they are going to try to penetrate but have no substantive product offering at present. Cisco could be viewed as more of a threat but CHKPF appear to be keeping them at bay more than satisfactorily at present. One of the key barriers to entry in this market appears to be Checkpoint's OPSEC management software which has the capability of managing 100's of firewalls and will soon have its scaleability increased so that it can handle 1000's. This is driving their business increasingly towards enterprise type deals rather than single sales of firewalls. In any case, the rhetoric from MSFT sounded more like them trying to get CHKPF to talk to them about doing a deal. Weak ASPs: Overall ASPs were weak but this was due to the increasing proportion of sales being made to OEMs and enterprises; distributors have apparently seen no price erosion over the past quarter. This does not sound like a problem to me... DSO's: An accounting change internally has led to DSOs jumping significantly although at 56 days the ratio still compares well with other competitors and should now fall again. Again, where is the problem? It comes back to MSFT again... From my angle the MSFT risk is well in the price now and the volumes of stock trading are starting to fall back towards normal levels which is normally a sign that the sellers are mostly done. I don't know what the short term catalyst is to get the stock moving again, but trying to fine tune a stock trading at such a low multiple with a very high growth rate (and a history of beating expectations) is a recipe for missing out on an opportunity. This is a BUY!