Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : DCI Telecommunications - DCTC Today -- Ignore unavailable to you. Want to Upgrade?

To: Pr-Ac Man who wrote (5752)	5/14/1998 10:26:00 PM
From: Mr. Cellophane Man	Read Replies (2) \| Respond to of 19331

PA, Based upon your assumptions, I think your math is good and you raise some valid points. Since I feel several others on the thread know both the inner workings of DCI and the M&A business better than me, I hope they take the time to put forth any theories they have that might help address your questions. The only assumptions I'll put forth are: (1) I think JAH might be erriing on the conservative side as to DCI's current potential revenues and (2) synergies can make the whole greater than the sum of the parts. Unfortunately, although you can line up companies with potential synergies, IMO they can take time to actually develop. Dan

To: Pr-Ac Man who wrote (5752)	5/14/1998 11:35:00 PM
From: James Harold Alton	Respond to of 19331

PA, A couple things, first I believe that Joe can do better than buying companies for 1.5X revenues, look at the Edge deal, 8.7 million in revenues for the 12 months ended for 4.4 million shares valued at $2 or almost exactly 1 dollar per dollar of revenues. Some of the deals Joe has looked at have been even lower than this. Dan also has a point in his post about my 24 million being conservative and that given time the synergies inherrent in pulling together the types of companies Joe is bringing into DCI should enhance overall revenues. I think that the $10/share at the time of sale is quite possible. James

To: Pr-Ac Man who wrote (5752)	5/15/1998 3:59:00 AM
From: Bruce Galpeer	Read Replies (1) \| Respond to of 19331

PR, The first part of your assumption that, IMO is incorrect, is that DCI will have to repay any money to anyone upon sale of the company. In the M&A field the buyer takes on the debt of the seller. That is the cost of doing business. If the debt structure is too high then it could result in a lowering of the price being paid. In this case I do not see Joe making any deals that would cause that to happen. I do not expect him to overpay for any of the acquisitions. As for the number of shares outstanding that is still to be determined. The buyback has already taken in over 1 million shares and at current levels can continue to absorb stock. I fully expect DCI to spend the entire $5 million that has been allocated towards this. That would probably mean that over 2+ million shares will come off the table when all is said and done. Another thing about the 22 million shares that were possible before, is that I believe some portion of that number were shares that would have been distributed on an incentive basis. If DCI is sold in the near future, <1 year, then I would expect not to see those shares distributed. The reason being that those divisions will not have met their sales goals to earn the bonus shares. How many? I'm not sure but will attempt to find out. The assumption of 3X revenues may hold true for the industry but each case brings forth its own unique set of circumstances. It is a bit early to even try and guess as to what we will see as an offer until we see all the pieces in place. Also remember that if DCI picks up a few really prime pieces, I think that EDGE is one, potential buyers will pay the extra money for just those pieces. We have a long way to go before we see how this will even start to play out. Bruce

To: Pr-Ac Man who wrote (5752)	5/15/1998 6:37:00 AM
From: King Louie	Read Replies (1) \| Respond to of 19331

PA, I've wondered about the math myself and how we get to $10/share. I think we have to remember that the going rate for a company of the size we're building is 2.5-5 X earnings. Houlihan is packaging us at about 3X earnings, therefore I assume the acquiring company will be assuming our debt in the deal, just as Bruce said. If the debt were to be wiped out by the takeover then I would think that Houlihan would package us at a higher multiple than 3X earnings as part of that deal. JMO. KL

To: Pr-Ac Man who wrote (5752)	6/9/1998 12:50:00 AM
From: James Harold Alton	Read Replies (2) \| Respond to of 19331

PA, I think that it was you that had questioned how DCI could buy excellent companies at 1-1.5X revenues and then sell them for 3-3.5X? I tried to find your post with this question but could not so if I have misdirected this post to the wrong person my apologies. Anyway, in my most recent conversation with Joe, he brought up that he had read this question being asked on the BB and offered an explanation and asked that I post this. It really impressed me that our CEO as busy as he is still somehow finding time to read our BB and to do what he can to answer questions for us.. Since I'm not a fast writer and don't have a photographic memory, these words will be my own but I believe that they accurately reflect intent: First understand that Houlihan has done it's own DD on DCI and understands and believes in DCI's game plan to sell the company. If they did not, then a reputable firm such as Houlihan would not be interested in doing business with us to start with. Second, the potential (as well as the finalized deal with Edge) acquistions that Houlihan brought to us also understand DCI's game plan. Finally, while we might read from the 8-K that we bought Edge for 1X revenues, from Edges perspective, they just got 4.3 million shares of DCTC that if the game plan goes down as planned will be worth 43 million, or 5X+ revenues. The key here is that in making these deals, the companies being aquired are not figuring the deal on the current stock price, but instead on a higher future share value. Edge was a great deal for DCI, since for an expansion in the outstanding shares of about 20%, we more than doubled our revenues based on the previous 12 months per the numbers in the 8-K filed for Edge. And obviously when DCI is sold the deal is going to be very good for the parties that sold Edge and are holding our stock. I think the fact that excellent companies such as Edge are coming aboard for stock based on future projections adds credibility to Joe Murphy's long time goal of selling DCI at a good revenue multiple once certain revnues targets are met. I don't know exactly when this will happen and frankly I don't really care. (well within reason (G)) The important thing IMO is that we see continued progress towards those goal and to date that is what I am seeing. James