To: Mad2 who wrote (2157 ) 11/27/1998 12:34:00 PM From: vincenzo Read Replies (1) | Respond to
Mad2 - I was a little surprised that the short interest number for November was not a little higher. But keep in mind the number reported for November is only through the 8th. I believe the short interest number now is significantly higher with the two weeks of million plus volume days which have occurred since.Graphics Industry - The overall graphics industry is largely in the toilet with most players losing money on declining revenues. There are only two notable exceptions: NeoMagic the mobile graphics chip leader, and ATY the desktop leader. The other mobile graphics chip makers SIII and TRID have lost money and seen their stock price plummet this year. CHiPs the prior industry leader has been bought out by INTC at a sale price.History - Neo stock price has a history of rising into earnings then selling off, sometimes dramatically, after record results are released. Actually, there are some obvious market reasons for most of these declines, and some were influenced somewhat by catcalls from the shorts. Meanwhile, Neo has chugged along, gaining market share and reporting record results each quarter.Competition - There is a distinct fear of competition surrounding Neo. Primarily from Intel but also ATY and TRID are in the running. Design cycles are short and the future portends even greater feats of integration. As competitors develop comparable parts, margins are under pressure. Some of this pressure is apparent already as ASP's for older parts have dropped in the last few quarters.Bottom line - The bottom line is that the shorts are seeding the means of their own destruction. The large short interest is a source of demand for a large amount of stock which must be purchased at some point regardless of the stock price. My bet is that the stock will move toward it's full value which I believe is about $28 or 20 times next year's earnings. This rise will be fueled in part by short covering.
