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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: grogger who wrote (13169)	12/19/1998 9:51:00 AM
From: Marc Phelan	Respond to of 13925

Rob, is some bad news lurking? Not directly related but close enough for me. biz.yahoo.com Can sound be far behind? Happy Holidays, Marc

To: grogger who wrote (13169)	12/19/1998 4:22:00 PM
From: Dennis G.	Read Replies (2) \| Respond to of 13925

Personally, I think the main factor in the price drop is institutional house-cleaning. This is one of their small-time losers for the year, and they don't care what they get for it now. They just want it off the books. But because their temporary supply exceeds demand, the price drops rapidly. Certainly the TDFX move spooked some others out. But just because the stock is going down doesn't mean that there must be bad news on the way. There really is no evidence that the company is having a bad quarter or will have a bad year. In fact the signs are actually positive. I just got ML's latest report from Bernard Tan, who had quite noticeably soured on them in the summer. The title on the report is "So far, so good". Here are some parts: "Investment Highlights: Current quarter is tracking well. In fact, demand exceeds supply in many products. Implication of a rising backlog is that seasonal decline in sales from Dec qtr to Mar qtr may be less pronounced than historical patterns. We have raised EPS estimates for FY99 from US$1.93 to US$2.00 and FY00 from US$2.31 to US$2.39. Maintaining our intermediate term price objective of US$25. Earnings: Our sense is Creative is doing well relative to its guidance. However, true to their conservative style, management is sticking to their Dec qtr guidance, for now. The company admitted that demand exceeded supply in Voodoo Banshee, DVD-ROM drives, PCI 64/128 sound cards and some speakers. DVD-ROM drive shortage was acute - demand, in some cases, more than 2x supply. Fortunately, the shortages affect every player and therefore, missed sales do not result in lost sales. This could lead to the Mar qtr being usually strong as the pentup demand is fulfilled. Historically, Creative's Mar qtr sales is 25-30% lower than the Dec qtr. We have revised our model to reflect only a 20% drop-off in the Mar 99 qtr. We have raised our Mar-99E qtr EPS forecast from 48cts to 53cts and for Jun-99E qtr from 54cts to 55cts." Notes: I believe these EPS numbers are without the buy back, which, of course, should raise them some. Also, this was written before the TDFX announcement. I don't know how Tan feels that will affect CREAF. But Tan was not really a fan of their being in the graphics business to begin with, so he may not see it as a real blow. Dennis