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Technology Stocks : Zitel-ZITL What's Happening -- Ignore unavailable to you. Want to Upgrade?

To: McNabb Brothers who wrote (16873)	7/28/1998 9:42:00 AM
From: Blue_Horseshoe	Read Replies (1) \| Respond to of 18263

even now Hank, do the % on our bet, notice you did not do it yesterday!

To: McNabb Brothers who wrote (16873)	7/28/1998 9:48:00 AM
From: Timoteo	Respond to of 18263

Zitl's quarter is far worse than I predicted. The most significant negative is Chait's departure as head of the Y2K division. It is the Y2K business and it alone that is keeping ZITL from being a $1 to $2 stock. If the head of that division is leaving what does that say for the future of the business. It is also telling that he did not leave to go to a bigger Y2K player i.e.: Keane, IBM, Compuware, etc. This tells me his Y2K resume was less than sterling, since the opportunities in that area would seem to be the best option for someone with his "experience". The additional 2,000,000 shares outstanding have made the per share loss less. Quarterly revenues will slide without storage business. Still no Y2K revenue or profits. I think there may be another shoe (bad news) to fall, though I can't imagine what it could be. Best Wishes, Timoteo

To: McNabb Brothers who wrote (16873)	7/28/1998 10:22:00 AM
From: Daniel Chisholm	Respond to of 18263

I'm suspicious! First, I think the year over year comparisons are invalid, because they include Datametrics in this year's results, but not in last year's. So various figures for this year look quite a bit better than last year, e.g., revenue is up. Second, a lot of one-off things have occurred, that might obscure the true situation. A cynical short (moi?) might think they're trying to obfuscate just how bad things really are, however a number of their charges look responsible, perhaps even positive for their outlook! It almost looks like they're taking a "big bath" now, so that these losses will be ignored as being one-time and extraordinary, and clear the way for some positive reports in the (near?) future. They sold their storage division, and record a $7.2m loss, with another $0.8m of related charges in Q4. This enabled them (I'm guessing) to get a lot of accounts receivable and inventories off their books. They also wrote down their deferred tax asset by $6.5m, goodwill by $0.7m, and recorded a charge of $1.1m for their latest $10m of financing (11%, wow!). As a result, their balance sheet (in their news release) looks to be a lot cleaner, and more representative of reality. It's not pristine by any stretch of the imagination - their Accounts Payable is worth nearly three month's sales, and their Accounts Receivable is about 100 days of sales. These figures may be a bit flaky, because I think that the sales for the quarter included sales from the now-sold Storage Division, but I think the AR and AP at the end of the quarter no longer include the Storage Division. Zitel now has 139 employess instead of 246. This should help them improve (reduce) their cash burn. They finished the quarter with $11.8m, so they ought to be able to continue operations for some time now, probably 9-12 more months. What's Zitel worth now? My optimistic guess at it's liquidation value would be its shareholders equity (a.k.a. Book Value) plus "long term debt", which is actually going to become equity sooner or later (though at the cost of some dilution). This gives $9.2m + $15.4m, or $24.6m. Assuming about 20m shares, this gives a ballpark of $1.25 per share. Now if they don't liquidate right away, and keep burning cash, this figure will go down (unless they actually start making a profit in their operations). And if the $14m "other assets" (mostly MD investment, I believe) isn't recoverable, the amount could be "considerably less", say 50 cents to 75 cents per share. - Daniel