Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: Pigboy who wrote (10860)	10/15/1998 8:21:00 AM
From: Sector Investor	Read Replies (1) \| Respond to of 42804

<<I disagree strategically for Intel. I believe the time to bargain is when a stock has been smacked big time (just as with the CHPS acquisition...CHPS had been up in the mid 20s and got knocked down to 9 and were sold ~14, I believe). >> From INTC's perspective, of course now would be better than later, but I don't think MRVC is willing to negotiate selling from this level with prospects looking good, and I don't see a hostile bid either. <<If MRVC makes it on its own back to the mid-teens (a fantasy right now, of course), then Intel, if they wanted them, would have to pay a LOT more than now. thoughts?>> Well, fantasy is not the word I would use. It is still not clear (to me at least) whether this problem causing lower earnings in the 3rd quarter is a one time phenomenon or a lasting one. Supporting a temporary problem we have: - They mentioned "Summer" softness in Europe. - The Revenue shortfall is only 10%-15% - hardly earth shattering. - 3 month only delay in Launch of Optical Product Line. - No significant revenues of EdgeBlaster/Edge Guardian until Q4. - Recent announcement of Fiber Driver family with immediate availability should boost sales immediately. Supporting a longer term problem we have: - MRVC stated their Networking margins are dropping due to increased price competition at the low end. - MRVC said their products are also less competitive technically recently, and they are in the process of upgrading them. They usually have about an 18 month ASIC design cycle. How far along in this process are they? - Continuing weakness internationally and a possible domestic slowdown due to the continuing world economic crisis. - MRVC is increasing their overhead to staff their R&D projects. This will require significantly higher revenues to overcome lower margins to keep EPS rising. ************* The market is expecting $0.12 for Q3 and $0.15 for Q4 and a flat 1999, as things stand now. Even this is extremely murky. If even this much were "solid" in the analyst minds (earnings visibility), we would be back in the double digits soon, IMO. Q3 should be a few cents better than $0.12. And if, however, Q4 is going to be better than $0.15, and 1999 is NOT going to be flat (the impact of Fiber Driver and their DWDM should help boost sales of their entire product line) and a large strategic partner IS announced, then moving up though the teens into the $20s again is a real possibility. Until we get more information (Q3 CC, Annual meeting), it will be hard to see ANYTHING, so I don't see a pre-earnings pop beyond $7+. At any rate, the possibility of mid-teens is much more than fantasy, IMO. Things should get a bit clearer in 2 weeks.