<OT> Teflon, re: SFE call. I listened to the whole thing. I'm not sure this is the board to do it on, so, I'll keep it brief (in so far as I am capable of being brief<g>).
The conf. was over 2 hours, and they covered a lot of ground. Some highlights:
1)Last year they did 6 business deals, this year they already did 10, and anticipate more. They review over 6000 proposals a year, and select very few. They are doing more deals this year not because they've lowered standards, but because there are more high-quality opportunities.
2)They are truly orienting themselves to become an internet-centric company, because that's where the most exciting technology/business is happening. Musser emphasized several times that he is not interested in "crazy" internet businesses, but in quality companies with good management, good differentiation and good profit margin/market share potential. He intimated that he feels good, even compared to CMGI. They look to three areas of the internet: e-commerce companies, client server application, internet infrastructure. They have careful criteria for getting involved.
3)They expect to get out probably 2 IPOs in July.
4)They've changed the rights structure of participation for shareholders, to IPO participation. Minimum shares between 200-500 shares, they have not settled all detailes yet. Probably for every 10 shares you get a crack at 1 IPO share. You'll be able to purchase the IPO shares at a slight premium to the offering (Musser's words "not by $5, but probably more like a teeny, 1/16"). It is also possible that even if you have fewer than the minimum SFE shares, you can still participate through a program wherein there a fund will be set up, like a mutual fund, and you buy a unit of that fund. Still there may be some minimums even then. 28,000 SFE shareholders have fewer than 500 shares. Over 65% of SFE shares are held in street name. The IPO participation schemes are still a work in progress, but they "have not forgotten their roots" and are determined to offer value to their shareholders. When the plan is final, they'll post it on their website, have a phone # you can call for info, and even send letters.
5)Board approved issuing of additional shares, ordinary and preferred. Musser was asked about a split. He says he is aware of the possibility, and hints "we now have the shares". But also implied that he does not see it happen immediately, because "there is too much going on between now and July". But he did not absolutely rule out anything.
6)Asked about sustaining internet valuations, and the wisdom of banking on them - he said "if you want to be in the internet business at all, and you do have to be if you want to be on the cutting edge, then these are the realities of the marketplace. You have to accept them. And there are benefits to the companies that IPO, because they get more capital to develop their business. However, he is aware of the valuation issue and that's why SFE is fanatical about creating actual value" - and again seemed to be comfortable being measured against CMGI.
7)They have an international unit that just *bought*, not invested in three businesses, they operate a bit different, on the LBO model. But he thinks the technology cutting edge is mostly in the US (except the telecom wireless business).
8)They've been selling TLAB shares, because they no longer have any influence and loyalty there, and they need cash to invest in new ventures. This is a better way to raise capital than sell SFE shares.
This is from memory, but I believe 99% accurate. Other stuff, but too long to get into. Most important - sense of excitement from Musser, they say a lot is going on, and a lot more is going to go on. He sees as many as 6-8 IPOs coming out this year.
All in all, sounded very good - I've listened to, and attended many shareholder meetings, so I speak from some context. A little thin on hard financial #'s (actually none), but understandable given the business model.
Bottom line: from 1-10, 10 being best, they get an 8 1/2 for the conference.
I'm holding on to my shares, will continue to trade, and I will add on weakness. I haven't done my TA workup on SFE today, but off the top of my head I'd say we may see a pull-back which will be a buying opportunity. Depends on the market to a degree. No more news is likely to be coming out directly, so you can imagine that it'll pull back a bit, especially that July is a ways away, and a split has not been set. To the downside, I see 65, but I'd back up the truck regardless, if it goes to high 60's, low 70's (unless the market is in a tailspin). Upside, resistance is at 100, probably cannot hold 90, unless the market is extremely positive (which may yet happen). Caveat: the above is a rough take, subject to revision.
If you'd like to know more, PM me, or take it to the SFE board, and I'll be happy to answer any questions (unfortunately I didn't record the call, as it happened right after trading, and I didn't set anything up, so I'll have to go from memory).
Good luck.
Morgan |
