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

To: TD who wrote (17273)	10/10/1998 6:37:00 PM
From: Michael	Read Replies (1) \| Respond to of 18263

Sure is a Nice Day interactive.wsj.com@4.cgi?venturabay/text/barrons/data/SB907973955803450500.djm/&NVP=&template=barrons-news-search.tmpl&form=barrons-news-search.html&dbname=barrons/index&words=zitel&any-all=AND&maxitems=30&HI=1 Zit, another faded Y2K stock, has suffered a similar unwinding. Zit shares have disintegrated, from about 60 to 3. The company's selling point was its stake in MatriDigm, a private company which earns its keep as a kind of code-fixing factory. Zit owns about 31% of MatriDigm, for which it paid about $7.4 million, according to SEC filings. The stock ran up on high hopes for the investment, and as MatriDigm disappointed, Zit plunged to Earth. In the nine months ended June 30, MatriDigm lost $10.8 million, on revenues of $3.8 million. Last week, Zit said it plans to acquire the rest of MatriDigm, and to adopt its name. Non-Zit MatriDigm holders will end up with a 44.5% stake in the combined company, receiving about 17 million new Zit shares. With the stock at 3, that values the MatriDigm shares it doesn't already own at about $51 million, and the whole thing at about $74 million. Assume MatriDigm has a strong fourth quarter; say they finished their September year with $6 million in revenues, which seems exceedingly generous. That suggests Zit is buying a tiny money-losing company for more than 12 times revenues. By that logic, tiny MatriDigm is worth more than the once-vaunted Viasoft, which despite its own woes is still reporting revenues at an annualized rate of about $100 million, nearly 20 times MatriDigm's run rate. Those MatriDigm guys drive a hard bargain, don't you think?