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

To: dfloydr who wrote (1444)	5/4/1998 2:38:00 PM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 3247

Floyd notes: "Look at the net growth in that backlog ... more than $20 million ... or more than 1Q98 sales. I sure hope that they are genuine deferrals and not cancellations waiting to happen. If TFS ever gets to deliver that backlog ... along with some of the new orders in process ... there will be some very nice quarterly reports, especially when you throw in the "programs moving out of development". Maybe the dimensional change I have been hoping for at TFS will happen yet? ______________________________________________________________________ Floyd, they should start shipping against that backlog in the current quarter. "Street" estimates of sales are approximately $26 - $28 million, and management has given us "guidance" in the most recent conference call that gross margins would be approximately 20%. Of course, it is also expensing (and not deferring, which they easily could have done) approximately $1 million in pre-opening costs for the China plant now under construction. That $1 million swing, if deferred, would nearly add 4% to gross margins. So, they were being conservative in their accounting treatment. By yearend, those expenses should be history, and we should return to more normal margins, perhaps as management has suggested, in the mid 20% range. Anyway, I have to believe that the market will take notice once the second quarter sales increase is put into perspective. Quarter to quarter, it could well turn out that revenues jump 50%, a creditable showing (though part of that major increase is due to the unusually slow first quarter...as deliveries on some programs were pushed out). Management did an adequate job of explaining this material during the last conference call, so each of us has a road map to follow when they report their numbers. I think you are right about the quantum change coming. I only hope the market is (generally speaking!) hospitable when the results are reported. It has been a long walk to the well. When we get there, I hope we are able to take a drink. <S>