I wrote Neal Sanders (IAI's VP) last Thursday. Here is our exchange as summarized and answered by Neal:
______________________________________________________________________
Scott:
My apology for replying to your message; it deserves a thoughful reply
which is sometimes at odds with the character of e-mail.
You wrote:
> "...I don't understand why the volume is still so low. There are
> now
> only 10-odd days to go before the 2nd quarter announcement (which, we
> are
> told, will be very good) but the interest in IAIC still seems to be
> very
> weak, at best. Surely other investors know about it by now? I would
> have
> expected a more vibrant buying spree by now...and what about
> Institutions?
> Are they not interested? Since we joined the National market the
> volume has
> not really increased that much...
> Also, there have not been any serious announcements for quite a while
> now. I
> am sure that would have perked things up a bit. "
>
IAIC is one of roughly 10,000 public companies out there vying for the
attention of the investing public. 2500 of those companies are on the
New York Exchange, 4,000 on NASDAQ NMS, the balance are over the
counter. We average about 58,000 shares a day; very low by the average
of Y2K stocks, but then we have only about 6.2 million shares
outstanding and only 4 million of those are in the float. The average
has been rising, though. Three months ago, we were at 45,000 shares.
The first key to IAI's share price is in the relative demand of buyers
and sellers. It may sound simplistic, but if there are more buyers than
sellers, a share price will rise; conversely more sellers than buyers,
and the price goes down (Zitel averages more than 750,000 shares a day,
but there are apparently a lot more than 750,000 shares for sale on any
given day). The second key -- far more important than demand -- is
performance. Berkshire Hathaway may trade 2,000 shares a day, but
that's no indication of the merits of the company; just the $75,000
share price.
Since arriving at IAI, I've spent a portion of my time trying to get IAI
better known by the financial community. I've done that by meeting with
groups of brokers and even individual investors. Ultimately, you have
to bang a kettle to be heard above the other 9,999 companies. Going
forward, I will branch out increasingly to speak to institutional
investors. Tomorrow, for example, IAI will be at a conference of about
400 primarily institutional investors in Washington DC. That will be
our first exposure to institutions since February. Late this year (an
eternity away in investing circles) we will be at the AEA Financial
Conference in San Diego, where 1200 of the top analysts and portfolio
managers gather each year to look at technology companies. I'm also
seeking incremental coverage for the stock, and have had good sessions
with several sell-side analysts. Will they initiate coverage? I can't
say; I can't force an analyst to put words to paper; it doesn't work
that way.
> "...News on Bank of China is good, but it doesn't specifiy a dollar
> amount
> or value of the contracts. W/O a $ amount attached to it, that news is
> just
> positive words. Can you show me the money ?
>
The Bank of China announcement served several purposes. First, it
revealed the name of a happy customer (the code has been remediated and
re-installed successfully). Second, the customer carries some clout in
banking circles -- Bank of China is one of the world's largest. Third,
it showed the capabilities of our Solutions Factory -- we did assessment
and planning as well as remediation. Because the job was VSE COBOL and
was remediated with Fix/2000, the release speaks volumes about the
CA/IAI relationship.
> ... Will there be a conference
> call preceeding the quarterly earnings announcement? "
>
There will be a conference call, but it will be after the earnings, not
before (otherwise, there isn't a lot to talk about). The number will be
faxed and emailed out to my distribution list.
> "I gotta tell you I'm a little concerned with this continued lack of
> volume.
> Earnings right around the corner and volume continues to sputter.
> What's up?
> It is getting close enought to Yr2K that interest should be picking
> up, I am
> starting to get the feeling that I may be in the wrong Yr2K Co.
> Nothing
> seems to get this thing moving, NMS, nothing contracts, nothing.
> Management
> saying they are looking for a record qtr. nothing. Anyone else
> starting to
> get that feeling. "
>
President Clinton's speech today notwithstanding, the lack of a
rush to address Y2K issues on the part of organizations is, I believe,
cost driven. If Amalgamated Widget's Y2K problem is going to cost $3.5
million to solve, and Amalgamated Widget only earned $7.5 million in
pre-tax profits last year, the company is looking at a massive earnings
shortfall. CIOs don't want to scare CEOs and CEOs don't want to scare
shareholders. So, CIOs wait -- in vain -- for word of the "magic
bullet" solution that will solve the problem for, say, $35,000. Those
aspirations are aided and abetted by garbage articles such as the one
that appeared the other day in USA TODAY (and subsequently in CNNfn) on
a privately held Massachusetts company that has promoted its windowing
solution as some new kind of holy grail.
> Neal, my bottom line question is this:
> Is my worry justified or do you believe that a loyal IAI shareholder
> shoud
> be happy after the report on July 20 ?
>
Today is July 14 and, at 4:30 EDT, I still not not know what IAI's
earnings will be. We have worked very hard this quarter, we have a lot
of new customers to show for our efforts, and those customers will
translate into revenues. Along about now, most responsible companies go
into a "quiet" period so that they avoid inadvertent selective
disclosure about their earnings. On that note, I'll close, and hope to
speak with you on Monday.
Neal Sanders |
