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

To: Jim Switz who wrote (4153)	12/13/1998 11:13:00 AM
From: Starowl	Read Replies (1) \| Respond to of 5944

Jim: Re. "let's hope for good numbers come Jan. 21." My impression, based on my observations of what Boucher and his crew have been doing since they took over in August, is the company really has turned the corner. Here are some of my reasons for feeling positive: -- The company has pushed aside those parts of the business that were not adding much to earnings and probably eating earnings. I'm talking about the FC efforts, the storage folks from Ridge, the satellite receiver card business. None of those sectors were producing enough revenue to overcome the sudden rupture of the core business revenue flow that began about a year ago, as a result of the Asia problems and the huge glut of drive inventory, not to mention the impact of UDMA. They were dragging the company down like anchors behind a yacht--cutting them loose would only improve things. -- Operating costs have been reduced by those divestitures. I don't know how by how much, but there are about 25 percent fewer salaries on the payroll now and probably a significantly shorter administrative tail wagging the company. Not all the savings have been realized yet, I guess, but this has to count for something either this quarter or next. -- Business conditions for the core areas of Adaptec's production--SCSI, RAID, networking, and software--are improving. The market since October suggests an appreciation for a relatively better business environment worldwide, despite lingering problems. Adaptec meanwhile has become the dominant player in CD recording software just as that business is beginning to hit its stride. Profit margins have to be fairly robust there. Ultra2 SCSI is also beginning to roll, from what I gather, and Adaptec has just lowered prices of its Ultra 2 cards and kits by 20 percent. That should be an incentive for buyers, especially in the server market. The SCSI and RAID associations with Dell are something to watch and rumor has it that at least another big deal is coming soon. I stress the word "rumor". And Adaptec has not entirely written off the future by sloughing off the non-productive parts of the business. It is maintaining hands in those pockets and, as you have noted, will move back into them at the right time. In moving out various divisions, it created strategic alliances with two companies and created BroadLogic to work on the satellite business. Those must be characterized as investments, at this stage, but not yet productive ones. I have no idea what the earnings will be and am at a loss for determining how to gauge earnings this quarter, with all the changes undergone by the company. But my impression, for what that's worth, is I won't be disappointed. Three things are moving higher--earnings projections, trading volume, and the stock price. Add my expectations and you have four. Ramblings on a cold, rainy day on the cusp of winter. Starowl