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Technology Stocks : FSII - The Worst is Over? -- Ignore unavailable to you. Want to Upgrade?

To: Douglas Rhodes who wrote (2269)	10/5/1998 10:52:00 AM
From: Donald Wennerstrom	Read Replies (1) \| Respond to of 2754

Yes, many of the companies that show recent losses have continued to invest heavily in R&D. FSII is a good example. In their latest 10-Q, released in July, they state that for the 9 months their R&D expenses were 32.4M (18 percent of sales) vs 29.4M (16.5 percent of sales) in 1997. FSII, like many companies, could have shown a profit with declining sales if they had reduced their R&D spending proportionally. They felt, however, that they needed to maintain, or increase, their R&D spending to stay in the forefront of their business areas. This decision meant they would have to report a loss instead of staying in the black. Another check point on their approach in R&D spending should be available this month when they are due to release the results of FY-98. One of the things I keep looking for that hasn't happened yet is some merger activity. With the over capacity in place to serve the present business base, it would seem some consolidation would occur. Some companies with a relatively low cash position will have difficulty in staying solvent if improving business conditions don't come soon.