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

To: Maurice S. Green who wrote (1662)	6/5/1998 1:07:00 AM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 3247

To the "thread," The following is a portion of a Dow Jones news story on MOT following that company's announcement yesterday of some heavy restructuring charges and 15,000 layoffs. My comments follow: ...Motorola recorded one of the highest average growth rates in sales and earnings among major U.S. multinationals until 1995. But the comapny stumbled badly when it failed to anticipate the industry's switch to digital cell phones from its long-dominant analog devices and then overestimated its capability to get digital equipment to market. Chief executive officer Christopher Galvin lately has been fuming over the condition of the company founded by his grandfather and led by his father in its glory days. In a frank memo sent to his executive staff earlier this year, Galvin declared that Motorola had become "arrogant and dogmatic" and "slower than we should have been in adapting to new events." Some of Motorola's problems stem from external events it can't control, such as the collapse of consumer demand for its products in Japan and Southeast Asia and the retrenchment of overextended U.S. paging companies. Motorola still has the resources to stage a major comeback, including enormous expertise with the sort of microprocessors that are being added to VCRs, microwave ovens and other products to create what could become a new generation of consumer devices. The company recently beat out Intel Corp. and other major chip makers to win a series of lucrative contracts from General Instrument Corp. to supply the digital brains for the cable giant's next generation of set-top boxes. These boxes are expected to launch the era of interactive television. The company may also reap the benefits of a daring decision made in 1988 to begin the $4 billion Iridium LLC project. Motorola spun off Iridium in 1991, keeping what is now a 20% interest and its role as general contractor. Iridium, which plans to offer a global cellular-phone service and connections among land-based cellular systems, has most of its satellites up. If it can successfully handle millions of calls after its commercial launch this September, Motorola could become a big manufacturer of satellite systems. Motorola said it believes financial performance trends can improve in the second half of 1998, if conditions in Asia stabilize. The company plans initiatives that will help it gain market share in businesses such as digital cellular phones. Motorola plans to introduce new products in that segment before the end of the third quarter. It also said it expects to see improved business results from the renewal of its communications equipment business, a process that began in April. Motorola will announce details of that plan next month. __________________________________________________________________ What does it all mean? MOT is behind in digital cell phones, and they are planning a BIG introduction of the new equipment in the third quarter. I would be very surprised if MOT didn't do some heavy duty promotion to get its new digital handsets out into the market with lots of "noise" and impact on market share. If the managers of that division don't get it exactly right, my guess is that all their names will appear in the next casualty layoff list. Anyone left out there that believes TFS will not be shipping on these orders soon??? I still believe that the company's third quarter will have revenues north of $ 30 million and earnings of about $.30 per share. From that level, the fourth quarter will show further improvement. These shares are really in the bargain basement.

To: Maurice S. Green who wrote (1662)	6/5/1998 4:04:00 AM
From: dfloydr	Read Replies (1) \| Respond to of 3247

Hi Rich: MOT's news is no real surprise. They have been floundering all over the place for at least the last two or three years. Remember, it was MOT that nearly did in TFS two years ago with their flip flop on orders. They have reminded me of IBM's predicament a decade or so ago ... too big and fat to notice that large parts of their business were lost on the wrong road to nowhere and that management was driving the lost troops further and further off track. Yup, they announced a 10% staffing cut and that they are writing off $2b, which is a huge write off and it should clear a lot of cobwebs out of the way. I looked at MOT's capitalization. At $55 a share it was $32.8 billion per Yahoo. After hours tonight the stock is down to $47 which has dropped the capitalization to about $28b. If they write off $2b, they are writing off about 7% of their capitalization at this $47 level. Needless to say, they will yet have other costs and it will take a while to turn this company around. However, for TFS the good news behind this bad news has to be that they are waking up and now they are writing off old stuff that has not been moving and closing or reallocating those parts of the company associated with those areas. Troublesome areas like that have most certainly consumed inordinate amounts of management time and money. To get out of this mess they need to turn to their future with a vengence ... which means, for example, executing their plans to roll out their announced digital gear in the cell phone area. They just have to get areas such as that moving or they will have no future and no credibility. They may have to buy in key elements that they may not have yet ... switches or whatever ... or perhaps join forces with those who can supply the missing parts in some other way ... but they have to get the game going their way ... yesterday. An interesting note: they are writing off $2b. The street has already marked the company down by $5b in the last few hours. Note that the write off is small compared to the punishment they will receive at the hands of the market if they do not get their act together fast. They may have no more than six months to show that they can do it before the likes of Siemens might really show up with an offer shareholders will welcome. $20 to 30 billion is a huge pile of assets. Not all of that is bad stuff. Some is in fact excellent. Owning 20% of Iridium could be very sweet. Now that they have pleaded "mea culpa", which is always the hard part and which usually comes long after it is obvious on the outside, they should be able to do the necessary ... at last. They probably need to eject a chunk of the top management that led them into this mess, since we do not go in for hari-kiri, but there must be a lot of good people who would welcome a chance to carry MOT forward from here. TFS may bounce around a bit, but like N.O., I think the bias should be upwards. Floyd