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Technology Stocks : Adaptec (ADPT) -- Ignore unavailable to you. Want to Upgrade?

To: Jim Switz who wrote (3940)	10/23/1998 12:57:00 PM
From: Jim Switz	Read Replies (1) \| Respond to of 5944

Let's talk about current (Q3) earnings. Consensus at the moment is about $0.11 and has been for several weeks. My listening to the CC gave me an impression that they expect to return to approx. Q1 revenues, which were $181M, based on rising SCSI and Ultra2 SCSI sales. Anyone else get that feeling? In Q1, they reported operating earnings of $0.10. R&D plus SG&A were about $92M. In Q2, R&D/SG&A were about $85.5M, and the CC yesterday indicated a continued reduction in these expenses. Let's assume SG&A will rise somewhat in proportion to increasing revenues - I'll say about $87M total, factoring in expense reductions as well. I'm not a professional analyst (for good reason!), but I think the company stands to make significantly more operating earnings from revenues similar to Q1. Instead of Q1's $0.10, I'm going to estimate $0.15, which is significantly above the consensus of $0.11 at the moment. To get there, I'm assuming $40M greater revenue, resulting in $5M additional after-tax operating profits, or about 4 cents/share (may even be 5 cents/share by then, after stock buybacks). Doesn't really matter too much to me whether my number is precisely correct, but it does seem obvious to me that factoring in 1)revenues back to Q1 levels and 2)expenses continuing to be reduced and 3)no more one-time charges that I foresee, we're looking at upward earnings revisions from the analysts soon. Also, keep in mind the CC comments that new products like RAID and VideOh! will not contribute materially in the current quarter. If these pan out, they're a nice future revenue stream to add beginning in Q4. Looks to me like we're solidly past the worst, barring world events turning against us once again. But I'm posting this to stir up discussion; what am I overlooking?