Toby, I agree that historically "the volatility of this stock produces bubbles". The reason things are different at this time is the ramp up of contracts, customers, sales and profits. Improved technology, new and improved products, with more on the NEAR horizon. Here is some more about this "grubby industrial product":
By Mary Ellen Lloyd, Staff Reporter
CHARLOTTE -(Dow Jones)- Jewelers carrying a new type of diamond
substitute - moissanite gemstones developed by C3 Inc. - say strong
early sales of the product have them dreaming of a green Christmas.
"It's just an amazing product," said Beau Beaudry, a jewelry designer
who runs a high-end gift and jewelry store in Porterville, Calif.
"There's been no other product that I've seen in the business that sells
as readily or as steadily as the moissanite."
Beaudry, a 25-year veteran of the jewelry business, said some
customers of his Jeweler's Gallery have been buying the lab-created
moissanite "like candy" since the first shipment arrived four months
ago. And with the Christmas shopping season officially starting Friday,
Beaudry expects his store sales this season to top last year's, thanks
to moissanite.
Charlotte jeweler Al Rousso also expects moissanite to play an
important role in Christmas sales, which are typically one-third to
one-fourth of his annual business. At 5-10% the retail cost of natural
diamonds, moissanite appeals to the customer who "wants the look but
can't afford the price of a diamond," said Rousso.
Synthetic moissanite fools jewelers' typical diamond-tester, a
thermal conductivity meter. However, Rousso and other trained jewelers
say they can spot the difference with a low-power magnifying lens.
"This is one of the greatest innovations in the jewelry industry in
the 55 years I've been in it," he said.
If true, that could be good news for C3. The Morrisville, N.C.,
company has been mining for profits since going public in November 1997.
C3 remains several quarters from profitability, Chief Executive Jeff
Hunter told Dow Jones recently.
The company posted a loss of $5.4 million, or 78 cents a share, in
the first nine months of 1998. For all of last year, C3 lost $4.9
million, or $1.73 a share, on fewer outstanding shares.
C3 emerged from its status as a development-stage company this July
and included figures from the first sales of moissanite in the third
quarter, when it shipped 6,500 carats of the gem and posted sales of
$1.2 million on it. Total sales for the period, which were $1.32
million, also included $100,000 from a test instrument C3 sells to
distinguish moissanite from diamonds.
Hunter said Cree Research Inc. (CREE), the supplier of silicon
carbide crystals - the basic material of the stones - is working to
improve yields from the crystals by at least half. If Cree, which is run
by Hunter's brother Neal, can do that, C3 should be profitable by
mid-1999, said Hunter.
On Tuesday, C3 announced agreements for two new international
distributors and for 24 new U.S. retailers. The international agreements
require minimum moissanite purchases of about $10 million through 2000,
including about $100,000 in 1998. The domestic agreements bring the
total number of U.S. outlets to 76.
Meanwhile, demand for moissanite jewelry continues to gain momentum,
according to retailers. C3's Hunter said he is comfortable that the
company will achieve projected shipment levels of about 10,000 carats of
the gem to distributors in the fourth quarter, over 50% more than in the
previous quarter.
Analyst John Paulson of Paulson Investment Co., the managing
underwriter for C3's November 1997 initial public offering, estimates
that C3 could produce 120,000 to 140,000 carats in 1999, resulting in
earnings of 25 cents to 30 cents a share for the year.
Jewelers Rousso of Charlotte and Beaudry of Porterville, Calif., are
both C3 shareholders. They began selling moissanite after seeing samples
at an industry trade show a year ago. They report higher profit margins
on moissanite jewelry than on real diamond pieces. And Beaudry said
moissanite is easier to sell: the pitch excludes the lengthy comparison
of individual stones' clarity and color grades often sought by diamond
buyers.
One customer drove 7 1/2 hours from northern California, spent 10
minutes in the store, and bought a $5,500 ring with a 2 1/2-carat
moissanite stone and diamond baguettes for his fiancee. A similarly
fancy mounting in all diamonds would have cost $18,000. More typically,
Beaudry sells a one carat moissanite stone for about $550. It would cost
$6,000 for a similar diamond.
Beaudry said his store sold $8,000 worth of jewelry using moissanite
on the first Saturday it was available, and he estimates that the gem
has nearly doubled his total sales in four months. He had placed five or
six orders from C3, each averaging $16,000 to $18,000, and he is
planning on opening a mostly-moissanite store in nearby Bakersfield next
year.
Rousso, who owns Al Rousso's Brownlee Jewelers in downtown Charlotte,
is getting rid of his inventory of cubic zirconia, another diamond
simulant, to make room for more moissanite. Cubic zirconia typically has
a glassy look absent of color. But moissanite is often more sparkly and
colorful than a diamond - qualities that help many professional jewelers
tell the two apart.
"Moissanite looks like it's almost too good to be true," commented
Don Dayton, a certified gemologist who manages two pawn shops in
Hesperia, Calif. He and other pawn shop operators said identifying
moissanite is a hot topic because of the potential for fakes to be
passed as diamonds.
Still, the near-diamond qualities are what make the stones attractive
to many customers, Rousso said. Despite a low-profile marketing campaign
so far, people are calling and visiting the store seeking moissanite, he
said.
Spokesmen for the Gemological Institute of America, a Carlsbad,
Calif., trade industry group, and Jewelers of America, a New York City
retail trade association, don't see moissanite threatening diamond
sales. In fact, synthetic emeralds, rubies and sapphires have served to
underscore the value and rarity of natural gemstones, noted Jewelers of
America Executive Director Matthew Runci. That may be all the more the
case with moissanite and diamonds.
"I'm sure that there will be appropriate price points and approriate
customers and situations where a synthetic or simulant can fit in, but I
wouldn't rush to conclude that that's going to come at the expense of
natural diamonds," said Runci.
C3 shares (CTHR) closed Wednesday at $10.375, up $1.375, or 15%.
-Mary Ellen Lloyd; 704-371-4033
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved. |
