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Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: Sir Auric Goldfinger who wrote (14106)	2/17/1999 7:40:00 PM
From: Instock	Read Replies (1) \| Respond to of 29382

Auric: Can you name the date and time of the Amigo's picking FORE? Bet you can't! and you know why. LOL Go pick your nose. Hey! see you got your stocks going the wrong way again. Hope you covered before you were out to much money. ROFL You should try going LONG in a stock, your sure not making it as a short seller. ROFL at Boo Boo On another note: Since I get HATE email from Bob Monski with Auric mentioned in them, wonder what the connection is? Hummmmmmmmm.......??????????? Hi Bob Monski!! Waiting for your email, If your ISP will allow it mailed to me. LMAOAY Saw you hyping your little stock on Yahoo. I see you are just as popular there as... well, you know, the boards you have been kicked off of. So, is Auric really Bob Monski as my email suggest? Instock

To: Sir Auric Goldfinger who wrote (14106)	2/17/1999 9:01:00 PM
From: Sergio H	Read Replies (1) \| Respond to of 29382

Hi Auric. Thanks for your imput. FORE had quite a few fans. <Fore Systems: A Tempting Telecom Takeover Target Analyst: Chris Bulkey (2/11/99) The telecom equipment sector looks ripe for further consolidation. Lucent's (NYSE: LU) purchase of Ascend (NASDAQ: ASND) signals the increasing need of traditional equipment vendors to acquire data networking capabilities. Lucent's willingness to pay 13 times sales for Ascend demonstrates that telecom vendors are willing to pay premium valuations to enter data networking markets. Ascend was long rumored to be the industry's prime takeover candidate due its dominance in wide area networks (WAN) and Asynchronous Transfer Mode (ATM) technology. According to ABN AMRO Ascend controls 28.3% of the ATM WAN equipment market and 37.8% of the market for frame relay switches -- both #1 rankings. Data traffic will continue to explode in the coming years due to the growth of the Internet and the migration of mission critical functions to client/server computing environments. As large equipment vendors like Cisco (NASDAQ: CSCO), Lucent and Northern Telecom (NYSE: NT) expand their product offerings (offering end-to-end solutions) and build extensive sales and distribution capabilities, it will become increasingly difficult for small- and mid-sized vendors to compete. Hambrecht & Quist analyst Farrokh Billimoria figures that the smaller vendors will be compelled to partner or merge with larger players. 4 Takeover Targets Farrokh identifies four potentially attractive candidates: Newbridge Networks (NYSE: NN), Fore Systems (NASDAQ: FORE), 3Com (NASDAQ: COMS) and Cabletron Systems (NYSE: CS). In its Telecom outlook for 1999, ABN AMRO echoed much of Farrokh's sentiment noting that Lucent and Siemens (NASDAQ: SMAWY) are the two most likely to be active on the acquisition front. Industry heavyweights Alcatel (NYSE: ALA), Ericcson (NASDAQ: ERICY) and Tellabs (NASDAQ: TLAB) could also broaden their scope. Now that the Ciena (NASDAQ: CIEN) fiasco is out of the way Tellabs will likely look for an acquisition to fill out its ATM broadband strategy. Fore is our Fave So who makes the best acquisition candidate? Our research shows that Fore Systems seems to have the right product mix. Fore has a strong product line of ATM switching equipment, and its newest switch -- the ASX-4000 -- is expected to garner significant contract wins over the coming months. Over the past six quarters ATM switch products have been the most important contributor to revenue growth. In the December quarter Fore's ATM revenue increased 12% sequentially largely due to demand for the ASX-4000. Analysts expect that the burgeoning demand for ATM equipment in both wide area and local area networks will continue to place a premium on Fore shares. CIBC Oppenheimer analyst Martin Pyykkonen, although unwilling to comment on specific takeover possibilities, does admit that Fore could be an attractive candidate down the line. He notes that Fore has 'scarcity value' due to its 'significant ATM technology', which would make the company attractive to a larger equipment vendor. 3Com and Cabletron do not possess Fore's ATM capabilities, while Newbridge has a large exposure to the declining TDM market which places a strain on consistent profitability. Another consideration with Fore is its historic inability to generate returns on invested capital (ROIC) above their cost of capital. An infusion of capital and increased scale economies (from a combination with a larger player) would help change that trend. An analysis of comparable valuations solidifies Fore as the most attractive candidate in my opinion. Fore's $1.9 billion market cap pales in comparison to Newbridge and 3Com ($4.9 and $12.2 billion respectively), while Cabletron's $1.5 billion cap reflects its declining market position. Cabletron, once a behemoth, has since stumbled in this highly competitive industry. To buy Fore a potential suitor would not have to increase financial leverage, as the balance sheet is debt free. The other three companies, however, would come with fairly significant debt levels. Fore's management has also done a good job of cash flow generation over the years leaving the balance sheet flush with over 3 bucks a share in cash -- making the entity that much more attractive. Fore trades at 37 times this year's consensus estimates, which is much cheaper than Newbridge's 55 times multiple. Cabletron will post a loss this year making any P/E comparison meaningless. 3Com trades at 25 times, but has had some earnings disappointments and is still struggling with its previous acquisition of US Robotics. Fore, however, is the most expensive from a price to sales standpoint, but again it is important to remember that the other three companies have fundamental problems which justifies their lower valuations. I would not expect future acquisitions to command a multiple similar to Ascend due to the company's dominant market position and state of the art product line. If Fore were to fetch only half of the 13 times sales multiple assigned to Ascend you'd be looking at a $32.50 stock, more than 100% above Wednesday's closing price of $15.31. It is tough to speculate on potential takeovers, but we are confident that the networking industry will continue to consolidate. Heck even Lucent said it isn't done filling out its product line. With four or five other large players vying to remain competitive, the opportunities for consolidation are numerous. Bottom Line It's tough to speculate on timing, but I'd be surprised if Fore enters the new millenium as an independent company. Perhaps some of that sentiment is already priced into Fore's valuation, but as H&Q's Billimoria contends 'we believe the acquisition candidates will trade up over the next few months as their valuations reflect a greater acquisition premium.' > iionline.com