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Technology Stocks : Spectrum Signal Processing (SSPI) -- Ignore unavailable to you. Want to Upgrade?

To: EdR who wrote (2366)	3/25/1999 10:16:00 AM
From: JSwanson	Respond to of 4400

Ed and Thread, A few weeks ago I posed the question, "Why will Spectrum Signal succeed in its market?" Since that time I have sold just less than one half of my position. Not because I thought SSPI was a terrible stock (I do believe it is not as good a company as I had previously thought) but because I had made a significant bet on a company that I hadn't researched (enough). I felt it was better to cut my losses at close to 50% on half of that bet which is a sure sign this is the bottom for Spectrum. One thing I have noticed as I read through several months of posts is that there has been virtually zero talk about the economic value of this company. The market values this company at about $17.6 million or roughly $2 per share. Surely, long investors believe this value grossly understates the real, intrinsic value of this company. My next question, then, is, what is the value of Spectrum Signal Processing now and/or what do you expect it to be in 3 - 5 years? I have run several models including discounted cash flow and more market based models like price-to-earnings, price-to-book and price-to-sales models. You can probably guess which ones provide the brightest picture and which ones don't. Before I post the results and the variables and assumptions of these models, I would like to hear how some other investors are valuing SSPI and which methods of valuation are being used. The models I created do not rely on exact forecasts or projections but instead use a range of inputs to arrive at a sample of possible price outcomes in which a mean target price and standard deviation of target prices can be calculated. For example below is a description of the P/E model for a 3 year price target. Since SSPI does not pay a dividend I have left that portion of the model out. P/E and EPS Growth Model Parameters The P/E & EPS Growth model calculates the expected price as follows: Exp Price = (Norm EPS * [1 + EPS Growth] ^ 3) * P/E Multiple Where: Norm EPS = min to max EPS Growth = min to max P/E Multiple = min to max Obviously, the 'min' and 'max' are replaced with realistically obtainable forecasts. As you can see the model assumes that any EPS Growth and any P/E Multiple combination is possible within the min and max constraints. After the model has run through every possible combination, it is assumed that the distribution of results is normal and that any of the combinations is as likely to happen as any other. From the output an expected 3 year price target, an expected minimum 3 year price target and an expected maximum 3 year price target can be calculated using the mean 3 year target price and the standard deviation of the 3 year target prices. The Price/Book and Price/Sales models are very similar to the above example but the Discounted Cash Flow model actually builds pro forma financial statements based on historical relationships and some basic assumptions. So, everybody, what, in your opinion, is SSPI worth? Regards, John

To: EdR who wrote (2366)	3/25/1999 10:17:00 PM
From: Bradley W. Price	Read Replies (2) \| Respond to of 4400

Ed, correct me if I am wrong. Didn't SSPI announce something about a potential big-bucks base station contract with a European telcom manufacturer during CC call? Again, if I remember correctly, they were talking $100M plus. Its probably been posted, but I am too lazy to look it up. The other thing that strikes me is that this probably obviates the need to go to the interim step - 2.5G for data. I also personally am expecting a quick roll-out for 3G. Look at the demand generated by the palmtops for wireless data. My guess is that we are going to find out if this dog can fly pretty quickly. When I first invested, I didn't realize there was so much competition in the board market. I am hoping the s/w tools are going to carry the day. Regards, bp