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

To: Noblesse Oblige who wrote (1542)	5/29/1998 3:46:00 PM
From: Maurice S. Green	Respond to of 3247

All---this stop and go is not new with MOT. Some time ago 96/97 at an annual meeting when TFS said they were late in engineering, and I wondered why no cars were in the parking lot on Sat or Sun. Mr.B responded that they were behind schedule because their client could not make up their mind what they wanted the specs to be. If it were me I would have told MOT to come back when they knew what they wanted, or were ready to accept outside guidance. I once did that with K_Mart and lived to regret it. Come to think of it I did it with MOT too, and am still waiting for them to come to a conclusion. Anyhow, I am buying -margin be damned.

To: Noblesse Oblige who wrote (1542)	5/29/1998 4:30:00 PM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 3247

Hi D Floyd, "The truth of the matter" is that TFS has already been given a go-ahead on two of the three incremental MOT programs, and that those will begin shipment in early June. The last is expected to be shipping in volume by the end of June. Third quarter revenues should be in the ballpark of $ 31 or $ 32 million, up about 60% from 1997, and about 40% sequentially from quarter two. Assuming gross margins of about 22% (as Chinese production moves from mildly unprofitable to at least breakeven), third quarter earnings should be 28 cents or perhaps a penny or two more. Moreover, with gross margins at 24% in quarter four (as China moves from breakeven to profitable) sales of $ 37 million should break out to earnings of at least 40 cents per share, with an "upside surprise" possible based on management's assessment that full year sales would "BE AT LEAST 25%" above that of 1997. My own yearly estimate total is for sales of about $18.5, $22.0, $31.0, and $37.0 million, for a total of $ 108.5 million. If this very conservative management is lucky and puts an extra couple of million in either the third or the fourth quarter, earnings would be positively impacted by about 2 cents per million of revenue. It should be noted that the party line is for sales gains "OF AT LEAST 25%." Maybe our ying and yang will finally come into rough alignment, and we will get a happy surprise for change. Yes, it is true that MOT represents about 50% of sales, and its internal dynamics have impact on TFS. But, that will also be the case as MOT plays "catch up" in the market for digital handsets, as it attempts to recapture lost market share when it enters the domestic market. Interested parties should also note that Raefon makes a salient comment by pointing out that TFS's Chinese plant is about three or four miles from one operated by Ericson, another cellphone maker. I doubt that this is an accident, particularly since it is known that Ericson employees have occasionally been seen en masse at the Tempe plant. TFS has indicated that following MOT's joint development efforts with Kopin, that it felt "free" to explore relationships with other cellphone manufacturers. Though there has not yet been an announcement of this process coming to fruition, observers that discount that probability are being myopic. After all, doesn't it seem likely that both Ericson and Nokia would want the advantage of a US manufacturer putting together product in China? Or, more to the point, wouldn't they want to have at least a portion of their LCD production needs with a US company, so that they could "hedge" the varying currency risks? Yep...it is disappointing. But management has finally turned on the light, and we are a mere one month away from quarter three. Have a good weekend.