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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (1383)	4/21/1999 6:54:00 AM
From: Mike Buckley	Read Replies (4) \| Respond to of 54805

Hey, you're a Quillionaire! No, Frank. I'm only half a Quillionaire. I share the Q with my wife. :) Lindy, Thanks for mentioning Siebel. The scariest thing about the company is that they seem to do no wrong, and we all know that doesn't last forever. Vantive just fired there founding CEO because their licensing revenue continues to be so awful. Network Associates' revenue is so far in the tank that they said they have no idea how much it will be, leading one analyst to predict revenues next quarter that are a full 90% off previous quarters. (I realize NETA isn't the same kind of enterprise software, but it is software that they sell.) PeopleSoft, Manugistics, SAP and most of the enterprise software companies are showing huge problems of one sort or another. Yet Siebel acquired Scopus, integrated the company and the technology without an apparent single problem, and continues to rock and roll as if there is no tomorrow. It bodes well for now but I hate to think what will happen when Siebel experiences the inevitable glitch. Back to the Q. Ericsson paid almost five times sales for the money-losing infrastructure biz. Using a run rate of $3.6 billion for the pro forma revenue, the market is paying less than 3 times sales for the profitable part of the biz. I realize that the infrastructure sale had a buy-out premium built into the equation, so let's be generous and whack off a 40% premium. That gets us to a market value sans premium of 3 times sales for the unprofitable biz. No matter how you look at it, the market is still paying no more for the profitable side of the biz than the immensely unprofitable side. Every time I look at valuations of the Q, I'm always surprised that traditional valuations show it to be fairly valued or under valued despite its gorilla qualities. Traditional valuations are supposed to appear over valued with gorillas, but that's not the case with this one. --Mike Buckley