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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 (1706)	6/8/1998 12:06:00 PM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 3247

Hi Maurice.... You have asked about whether mutual funds could get involved with TFS common shares. In addition, on other matters relating to MOT contracts and shipments, I have had reason to have discussion with a company representative. First, it depends on the fund. Obviously, there is literally no point in Fidelity Magellan owning the shares, because to have any "impact" on the Fund would require a share position that is unwieldy AND impossible to develop. And, if it wouldn't have any impact on the fund, why follow the company? On the other hand, there are many small cap funds that could justify taking 25,000 - 100,000 share positions if they thought the investment story had merit. The responsibility of finding those funds and marketing the investment idea to them is not only in the province of TFS's management, but also part of the duties of a good investment banker. All of this is predicated on the shares developing a bit of liquidity, which has been a problem for some time. There are a multitude of ways to correct that issue, including minor stock splits, annual stock dividends which have impact over time, a token cash dividend (as some funds can't buy shares of companies that have no payouts), regular trips to meet with the investment community (such as investment banker sponsored "road shows" with funds and/or money managers that are of the appropriate size and style), and so forth. All of us hope that "liquidity" will be forthcoming at some point, Maurice. It will take some management initiatives to develop it, but once it is done, the market in the shares will likely stay permanently broader. That assumes, of course, that there is a continuing flow of information and regular meetings with the important shareholders (and potential shareholders). Bob Cihra has done a decent job in highlighting the fundamentals of the business, but it has become intuitively obvious that he either has too limited a following or that he doesn't know how to market the story. This isn't entirely his fault, of course, as the company hasn't really provided him with much assistance for the last year or two. Hopefully, that will be addressed in time. Parenthetically, I spoke to TFS this morning to specifically inquire whether the MOT programs had begun shipping, as there has been some speculation to that effect on this "thread" as well as in other locations. The individual that I spoke to indicated that it was generally understood that some shipments were taking place, but couldn't provide data to me on the specific number of the three programs that had moved into that condition. I expect to hear more on this within a day or so. I emphasized that I thought it was very important that a press release be issued as soon as possible to clear the matter up for investors, as the stock obviously owed its recent dip to management's announcement of the shipping delay from a week or so ago. Moreover, I also opined that the "market" was concerned about a repetition of the 1996 problem with MOT (where an important contract was canceled unexpectedly, resulting in a terrible downtick in TFS stock), and though I understood that we were talking "delay" here (and not cancellation), that shareholders have long memories, and I had no doubt that there was confusion and fright in the ranks. I further opined that this confusion was unnecessary if TFS had actually started shipping on the programs, and offered my suggestion that a press release would be appropriate under the circumstances. This is particularly so because it is obvious that management may like to do a secondary later this year (to finance the company's growth without resorting to bank debt), and that the more holders were confident about TFS's future, the less dilution we would suffer if and when that offering actually came. I expect to hear back on this issue as well. Have a good day, Maurice.

To: Maurice S. Green who wrote (1706)	6/8/1998 12:19:00 PM
From: michael c. dodge	Read Replies (1) \| Respond to of 3247

Rick.....there was a good article in the NYT business section yesterday about a microcap fund manager being replaced by a mid-cap (up to $1B) manager, to "stabilize" the portfolio. The new guy simply dumps the small caps. Look out below !!! Anyway, I spent the weekend studying the handset market(s). MOT is simply and significantly behind Ericsson and Nokia in product offerings, and was just somehow blind to the shift to digital (global sales of which are just now exceeding analog handset sales). It will be very important to compare the consumer features, form factor, and capacities of the new MOT handsets introduced in July, with those particularly of Nokia, put into the market earlier this year (N.O., you got one of those, operating in three modes, 2000 hours standby, five-line display with dynamic fonts for email--whatever--....no???). In a market selling 30%-35% more units each year.....20% unit growth loses market share, and share eventually goes to almost zero. That is the path MOT is on today. Unless the MOT July products are real winners, Nokia will pass MOT in global handset sales before the end of this year. Number three is not the place to be in any global market (per Jack Welch). There could be no better event for TFS, IMO, than a design win and purchase order from Ericsson or Nokia. Everyone else is a bit player, and we are joined at the hip for 50% of our business, to a team which is number three and losing share today. We will still sell displays, etc. to MOT, but we will be at increased risk of cancellations, and that risk will be recognized by Wall Street, and the company will continue to get the valuation it deserves. Pay close attention to the European and Asian product reviews on the MOT products.....not just the American magazines. America is not the biggest market, and our publications are biased---as they are everywhere---but the Japanese and Chinese and Indonesian, and German and French and Spanish consumers do not receive or read their magazines in English. If the MOT products do well worldwide, we will be disproportionately rewarded...If they do not sell well, we will still benefit in the short run from production to fill the channel, but we will be at significantly increased risk of future order cancellations.....I hope TFS management remembers the history, and does not condemn us all to repeat it. mcd