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Technology Stocks : IFMX - Investment Discussion -- Ignore unavailable to you. Want to Upgrade?

To: Lou who wrote (10545)	4/30/1998 6:12:00 PM
From: James A. Shankland	Read Replies (1) \| Respond to of 14631

This means if the stock is at (?) on MAY 10, I will make (?) per share, and if it is at (?) on MONTH/DAY, I will lose (?) per share. Just something for we investors in 101. ("For we"?) Here's a simple approximation that works for I: Imagine a graph with IFMX's stock price plotted against time. Draw a straight line from IFMX's price right now to 10 7/8 (the $10 strike price, plus the 7/8 Bob sold the option for) on May 15. See the upward slope? Any time that IFMX's actual price is below that line, Bob can likely close out his option position for less than he got for it, so he comes out ahead. If IFMX stays below 10 for the next 2 weeks, Bob doesn't have to do anything; the 7/8 is his to keep. If it rises above 10 and stays there, then Bob tries to cover his short option position on an opportune dip. Among other things, the large open interest in the IFMX May 10 calls will tend to push IFMX's price down toward 10 as expiration approaches, assuming it's above 10 in the first place. It's probably a pretty good bet. Not a good idea if you sincerely believe that IFMX will be at 15 within 2 weeks; but OK if you think that much of the good news has already been priced into the stock (it has moved from the low 8's to around 10 in just a couple of weeks).

To: Lou who wrote (10545)	4/30/1998 6:16:00 PM
From: Robert Graham	Respond to of 14631

Right now I am developing my strategy on when to cover my CALLs. The idea here was to have the time value eroding nature of options in their last month before expiration work to my benefit. This means that if the price did not do anything I could cover to retain most of the premium I have received on my option writes. If I buy when the option has an unusually high premium, this can buffer me from a little price rise in the stock to keep me from covering at a loss. The earnings came in at something like a 6 cents earnings surprise. This means more speculators will be jumping in this stock for a play. I do not see this lasting long, for this is no Compaq we are dealing with here, but the market is made up of speculators that are very positive and tend to play it "fast and loose" in this market. So where they see potential for prift in news items, they will be there playing it without regards to actual risk. What was last quarter's earnings on this stock? If I am not mistaken, I think this quarter came in at the same number or a little below. When Bob F managed to announce a profit last quarter, that afforded him a very valuable short term benefit. At the same time, this has upped the stakes a bit for him since the market will be judging his performance on that number instead of a lower perhaps more manageable number. Also this quarter's announcement does lend credibility to last quarter's earnings report. I suspect the analysts found initial credibility concerns with the "out of the blue" announcement of a profit for last quarter. That is why they tended to be a bit pessimistic. Also as a turnaround progresses, so does its cost and the associated writeoffs. But now the longer term turnaround players are looking for solid evidence of a well-executed turnaround in progress. I imagine they do have high expectations with Bob F and they desire to see their expectations met. At this point in time, I think the emphasis will be placed on the forward guidance provided by company officials in their conference call. So lets attetmpt to put a list together of items that we should look for in the conference call. Here is a very short list of mine that I can think of off the top of my head: 1. Good evidence that this profit came primarily new sales of their products. Liscence revenue will come when the customer base is reestablished. No evidence or even a hint of any part of this profit coming from bookwork that may even be accepted or "normal" in a different situation. It only took 2 cents to report a profit, and this should not be that hard to come up with in bookwork, particularly given last quarter's report if it had any relevance at all. Call me a cynic, but still IMO Bob F has to live up 100% to the initial integrity he has estalished. 2. Solid evidence of having procured significant sales with their old and new customers alike, particularly with the larger more well-recognized companies, with more to come. This will support the thinking that Informix is not only selling to new customers but also recovering key customers who are putting a vote of confidence in about the company through a significant purchase. Pluses are if the purchases involve a significant installation, are with their newer Universal Server technology, and are the result of winning bids in competition with Oracle. Note that I am focusing on items that would be a "no brainer" to the public at large which is important. 3. New working relationships established in key partnerships like with SAP and BAAN. 4. IMO cash flow along with expense management is very important here with regards to a turnaround. Also are they managing their large discretionary expenses intelligently. At this point I am willing to see them take on LT debt but I would not want it to exceed some gross value. I actually expect for them to take on LT debt. If debt does not show up here, I would look to see how the financing of the large probable costs associated with this turnaround are being financed. If they are allowing their ST debt to take on this type of non-operating cost, then I would count this against the company. 5. Very positive forward guidance and feel that the CEO thinks the company is turning around. No more comments like "Gee, this software business is REALLY different from the hardwarre business that I come from. This has been a real learning expierience for me". This after he has placed other people from the hardware side of the business into key executive and management positions at Informix. Here I am looking for action, integrity, and I want to sense that the CEO is convinced that the turnaround is actually happening. Now if I do not see what I have listed above basically present in this conference call, then I will hold my CCs instead of immediately covering them to stem a loss. I then will wait for the speculative trading to unfold and an expected retesting of 10 to cover. Technically I see the stock has been improving particularly with its chart. I do see Bob F as a smart, experienced, action oriented person who has evidently taken on much more than he anticipated, including this learnings curve related to running a new business in a market that he has not experienced before. But he is going through a significant learning curve along dealing with what else goes into that of a turnaround, which not many people can successfully perform. And do not forget some key individuals on his staff is going through their version of his learning curve too. I do believe this turnaround will take more time than most people are expecting. And I do think the last two earnings reports are misleading in this way. Bob Graham

To: Lou who wrote (10545)	4/30/1998 9:28:00 PM
From: MileHigh	Read Replies (2) \| Respond to of 14631

It means that if IFMX closes above 10 at May expiration, Bob will be called on his shares and he will net less than $1.00 premium per share..I was thinking of selling calls on my 2000 shares but would not sell a May 10, not enough premium in it for me to justify being locked out of any upside potential....I believe this thing can close above 11 by May expiration, at which point Bob does not participate in the rally... Now if he sold a 12.5 call and it closes at 12 on May expiration, he keeps the premium and his IFMX shares and thereby lowers his cost basis.... Just my point of view...Everyone has different investment rules they live by. ;-) Regards, MileHigh