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Gold/Mining/Energy : Direct Focus Inc. (DFXI) -- Ignore unavailable to you. Want to Upgrade?

To: Don Carson who wrote (351)	11/25/1998 7:38:00 PM
From: Gordo	Read Replies (1) \| Respond to of 768

Don, I appreciate what you're saying from a brand and marketing perspective - Nautilus is one of the best known and trusted brands in the fitness industry. However, on face value the deal doesn't necessarily make as much sense to me from a financial perspective. In your post, you are suggesting that there are some substantial tax losses that DFX can use to offset future income. This in and off itself can be a very beneficial way to finance the acquisition - do you know how much Nautilus has in losses that can be used? The part that concerns me is the erosion of margin (Nautilus' gross margins are a lot lower than DFX's), and the bottom line impact of merging an operation that is bleeding losses to the tune of $5M US a year. Unless they are prepared to do something significant to address this, I don't see $5M a year in upside here (and that would just get Nautilus to break-even).