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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: Doug Fowler who wrote (11160)	5/2/1998 7:30:00 AM
From: Fred Fahmy	Read Replies (4) \| Respond to of 13925

Doug, I definitely understand you frustration. It's hard to hold a stock with a trailing P/E of 8.4 (19.375/2.3) and watch it go nowhere. Especially, when management (and a conservative management at that) just told the investment community that they expect to see 20-25% top-line growth in the coming fiscal year (which starts in two months). It's also tough when you see other companies with no earnings trading at ridiculous valuations. Personally, I have been using these dips to accumulate more shares. I also used covered calls to generate income last time the stock surged to 24 because I have always suspected that the stock will do most of its moving during the later part of the year. At the time I got 2.25 for July 30's. <The company is not growing sales.> The strategies that they outlined and are executing to grow revenue to not show results immediately. However, if revenues do not grow meaningfully during this coming fiscal year, I would be concerned. Strategic acquisitions, working on establishing OEM relationships, developing and releasing new products (i.e. expanding their product line) are things that take time to produce results. Management has put a stake in the ground with their recent fiscal guidance. Personally, I would be very satisfied with any revenue growth over 20%. Keep in mind that although they did not show explosive sales growth last quarter, they did turn in solid results at a time when many tech companies are struggling to show any growth or show any positive earnings. <I am not convinced one bit that DVD is going to do anything significant for them this year.> Possibly, but IMO right now getting established in this segment is what is key. Right now, DELL, Gateway, Micron, etc. all have DVD drives standard in their top line systems. Unfortunately, they seem to all use Toshiba products. CREAF definitely needs to make more inroads into the OEM business (something they are working on) and stop relying solely on the retail channel. < I wouldn't be surprised to see DVD become one of the biggest flops of the technology revolution.> I would be shocked if DVD does not become one of the biggest successes in the electronic age. DVD is going to replace VCR's, music CD players and all forms of computer CD-ROM,R,RW's. I don't see any way that this does not happen. The question is how fast and can CREAF get their fair share of the business. DVD technology still has a way to go and we still are some time away from mainstream acceptance and widespread use. I never believed earlier claims that DVD was going to be big "this year". There are many reasons for this. Write-standard issues, limited software titles (referring to PC DVD's), some of the movie studios taking a wait and see approach (although many many movies are currently available), speed issues vs. CD-ROM, etc. However, in the end I strongly believe that DVD is going to be huge since it will replace multiple electronic devices. <Obviously, the market is not buying the Creative story.> As for now, I don't think anyone can argue against this statement. < I get the impression that Sim is not nearly as excited about its future as he was three months ago.> That's strange...I don't get that impression at all. Did you listen to the CC? I thought Sim sounded very bullish about the future and quite honestly was stunned at management's bold revenue guidance. Threats: As with all tech stocks there are always competitive threats from a technology/product viewpoint. However, for the near term (next 12 months) CREAF's product line looks strong and well positioned. IMO, the immediate threats are macro issues related to the economy and the industry. <What is Creative doing to take advantage of the Internet? Why aren't they playing in the RealAudio space? Where is the imagination here?> Good questions. I don't have a good direct answer and I'm not sure of any specific focuses in this area. More generally, however, the total multimedia solution strategy fits in nicely with where the internet is heading. As the internet grows and bandwidth improves, the net will become much more multi-media oriented. Right now, multi-media on the net is fairly optional. In the future I think sound and video will be integral. Good luck, FF