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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: Kevin McKenzie who wrote (33914)	4/28/1999 7:44:00 PM
From: gpphantom	Read Replies (1) \| Respond to of 90042

Sorry for the length Disclaimer - Do your own DD, this is just some of mine, and my own opinion. I don't usually make recommendations but I just wanted to bring this to the thread's attention because if I'm right, tomorrow is the last time to get in before results are announced. A short term position to consider: Adaptec (ADPT, $21.625) reports 4Q and year ended Mar 31, 1999 results tomorrow after the bell. I have a large position (for me) in ADPT and believe at today's price there is money to be made with little downside. They are a turn around story. Last Q street estimates were $0.14 and they pre-announced that they expected results in excess of $0.20. Final results came in at $0.24 and on a pro-forma basis that excluded operations of a BU they sold during the Q, the number was $0.26. Zacks and First Call expect 4Q earnings of $0.29 and $0.30, respectively. I feel, based on their 3Q comments, that they will exceed this number, perhaps significantly. So, why will they exceed estimates? They stated that the were targeting operating expenses towards 35% of revenues by the end of this Q. They have been very successful at cutting expenses since the 2Q'99 and final cuts were to be made this Q. If I assume revenues increase ~8% sequentially over 3Q pro-forma levels, which should be conservative and due to a new server product (RAID) contract with Dell which saw shipments commence toward the end of 3Q, and the favorable recent earnings releases from product users AAPL, GTWY, and DELL, and op expenses at 3Q pro-forma levels, I get a $0.32 number which I view as CONSERVATIVE, pardon all the ands. If I use a 35% op expense number, the result is around $0.36. That may be a little too aggressive. Some fundamentals: Strong balance sheet, Cash at the end of 3Q of $655.5 million or $6.08/shr Current ratio of 7.72x Declining inventories L/T debt/equity 0.30 and L/T debt/cash 0.35 Tangible book value of $7.16 and price/book of 3.02x Current mean est'd EPS Mar'00 $1.34 or 16.1x The $1.34 estimate should get revised upwards if they exceed estimates Est'd L/T growth rate 20% Problem/loss first and second quarters '99 ended June 30 and September 30, 1998 distort the most recent 12 month numbers, so those numbers don't look good. Again, ADPT is a turnaround and management has acted quickly. With so much focus on the internet and the need for more and more powerful servers to handle the load, I think this turnaround is solid. So, at today's closing price of $21.625, I see this as a no-brainer value stock. They would have pre-announced if they were going to fall short and they kind of let the cat out of the bag when they attributed a strong '99 performance in part to their newly appointed CEO. What I don't understand is why the street is trading them at this low level. Of course, I'm expecting better than est'd results; maybe they aren't? Wish me luck, tomorrow atb will tell. I'm hoping Friday will make me very happy.