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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: Dee Jay who wrote (12245)	2/20/1999 10:32:00 PM
From: Bruce L	Read Replies (4) \| Respond to of 42804

<If you believe ...you can sell at a big loss, wait 30 days and buy back in....I feel that the price cannot hover around the cash value ...for very long but there is a show me attitude on the Street that enables bargain hunters to buy now IF they believe the future holds reasonable prospects...> Dee Jay: You've summed up very well the conundrum of MRVC to prospective investors. The predicate to any decision, of course, is "IF you believe." If this hurdle is overcome, the question then becomes: how much time do I have to act. REASONABLE PROSPECTS Readers of this thread have heard this ad nauseum - 34 consecutive quarters of sequentially increasing earnings and revenue - but to my mind its importance cannot be overstated. "These guys" have a track record: not only have they proven that they can consistently design and build quality networking products, but as a no-frills, bare bones operation (with executives relying on their large equity stake and not their paltry $100,000 salaries) they can profitably sell that product at prices that historically undercut those of their major competitors. Even for the supposedly dismal Q4, remember: revenue year-over-year increased an impressive 55%. And from the foreign versus domestic sales breakdown, we can surmise that they "kicked butt", i.e., increased market penetration, in Europe. Finally, a strong case can be made that the only reason they weren't profitable in the last two quarters is that the company executives have made a huge long term bet on the future and have dramatically increased R&D and SGA spending. Will the bet pay off? I know the reasoning is circular but its all I can come up with: Look to their track record. HOW MUCH TIME DO WE HAVE TO ACT? For myself, the time is now. Last week (taking some profits in a company(PUMA) whose business I just couldn't evaluate) I added 2000 MRVC shares to my existing boatload: at 7 3/16, 6 9/16, 6 7/16 and 6 1/2. I'll give you my reasons why I felt it was too risky to wait. It all boils down to my technical analysis and MRVC's new products. In terms of technical indicators, all are mildly negative: MACD, money flow etc. However, if you look at a chart you will see that since October 15th MRVC has always bounced off of, or at least hovered around, 6 3/8. In this connection it's perhaps significant that the book, i.e., liquidation value of MRVC, is a little over 6 1/2. But what piques my interest is the time and sales data. On Thursday and Friday (Wednesday there was mindless selling on high volme) a clear majority of the larger block trades (i.e., > 2000 shares) were above the bid and usually at the ask. An exception was a 10,000 share trade at Thursday's bottom of 6 1/4. On Friday, I had reported earlier to the thread a trade of 8000 shares at 6 7/8 - above the ask. On going back through time and sales, I couldn't find this trade but did find one at about the same time of 8200 shares at 6 13/16 (the ask). A mystery; I am sure a saw the trade I reported. Later on Friday, there were 5 trades in quick succesion of between 2000- 4300 shares, all at 6 3/4 (the ask) and clearly part of a single transaction. My conclusion: some large traders are accumulating the stock. Finally, two weeks ago MRVC was trading as high as 10 3/4. On no news from this tight-lipped, "negatively candid", company. I have seen a similar pattern in other stocks: it would not take much in the way of news to "fill the gap" and trade at these levels again. NEW PRODUCTS a. The fiber drivers. This is an entirely new product line. MRVC had $2 million in sales of this brand new product this past quarter alone. And at the present it is rapidly expanding the capabilities and/or versions. b. Accel-a-Router (sp?) As I understand it, this product will at a relatively low cost extend the useful lives of 50,000 or more CISCO backbone routers. A potentially huge new market and the company plans to start shipping in March. c. Terabit Router. This carrier class product -if it can be brought succcessfully to market - by itself could add $30 per share to the value of MRVC. The company expects to ship by the end of the year, may already be in beta testing, but very definitely has a handful of carriers looking at it. At the CC, Noam mentioned a large carrier in South America, and clearly indicated there were others he could notname because of non-disclosure agreements. Hard news about any of the above - or even rumors - could cause an explosive move in MRVC. Long term, I am very confident that MRVC will do well. It may be that nothing happens in the next couple of months, but I don't want to take that risk; not when the stock can be had for under $7. Bruce