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Technology Stocks : Avid Technology -- Ignore unavailable to you. Want to Upgrade?

To: David Kuspa who wrote (546)	7/27/1998 4:03:00 PM
From: BMcV	Read Replies (1) \| Respond to of 777

Thanks for your long and thoughtful response. I'm not sure you really answered my question, but that doesn't really matter. I like to see counterarguments, whatever their motivation. A good intellectual drama has been playing out over on the INTC thread between a well-informed bear Paul Fiondella and a rabid (sorry, no other words fits him) Intel partisan, Paul Engel. Personally, I would not expend the time and energy to argue if I didn't have a financial stake in the issue. Perhaps on Yahoo there are more bulls to oppose your bearishness; here on SI there is so little discussion that your articulate and reasonable-sounding posts have set the tone, such as it is. That's the only reason I asked what brings you here. The moderately bullish case for AVID as I see it is as follows: 1) The stock is fairly valued to slightly undervalued based on the fundamentals of the present business. PE, revenues / share, net working capital / share (current assets - current liabilities - long-term debt) all support a valuation around these levels. In fact, depending on the software / hardware revenue split, a case could be made for a higher valuation, since software has higher margins. Today On CNBC Bill Miller described Avid as a software company in contrast to Silicon Graphics, who make the platforms on which their software runs (among others). 2) The good (and improving) fundamentals offer a margin of safety to an investment in the stock, unless you think the whole business might go down the drain. But with their huge installed base and universal acclaim for their products, it is hard to see why the whole thing should change overnight. Of course, it is the nature of technology investing that you never see why things will change until they already have. If you can't stand that risk, you shouldn't be in technology stocks. This may not be a gorilla company, since the market is not pervasive, but they are at least an orangatang--the biggest and best in a good-sized niche market. 3) Based on the current business, the stock could trade up into the upper 40's or down to 30 or so, depending on execution, current outlook, general market tone, etc. But to break out on the upside there needs to be a new revenue driver. Possibilities are the broadcast market with uncompressed video, HDTV, or Softimage. Who knows which, if any, of these will pan out. Still, with three shots, an upside breakout seems worth betting on, given the limited downside risk. And given the excellent management we've seen so far from CEO Miller and team. Caveats -- Besides being blindsided by some new technological development, I am a little worried that the Softimage deal was too expensive. Microsoft, as far as I'm concerned, is the kiss of the spider woman, if you recall that great film. It is possible that Avid felt they needed something new and that Microsoft --needing nothing-- took their pound of flesh. But maybe Softimage will get them into the same market as Pixar and they can suck up some of that bloated market cap. Finally, MDEA may have a better chance of going to 7 than AVID to 60, but they also stand a better chance of going to 1 than AVID to 10. David, what do you know about Softimage? What do they do? What to they do that no one else does? Were they worth the money? Good luck, wherever you are invested. Bruce