Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

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Thursday, July 13, 2006

Multi-Fineline Short Circuits

Multi-Fineline Electronix, Inc. (MFLX) is down almost 25% at $20.90 after the open due to its earnings warning. This company designs and manufactures flexible printed circuit boards and component assembly solutions for the electronics industry. Hmm, isn't that sector in the garbage heap?

While this looks like another case of companies having higher costs and weaker sales, this warning was actually just on earnings because of highers costs of goods sold. The street isn't trusting them on this internal analysis even after it maintained revenues of $126 million to $136 million. The street is assuming they report at the low-end of that range because the earnings forecast was dropped down to $7.5 million to $8.5 million, which stinks in comparison to the May forcast of $12.2 million to $13.6 million.

Its shares had recovered last Friday after Morgan Stanley had defended the stock saying that the weakness wasn't warranted. It had fallen the day before from $32.25 down to $26.50. Shares closed yesterday at $27.81 and are down to a sub-$21.00 this morning. this stock is now down more than 66% from the $60+ highs and from its levels in May before it showed guidance and lost 1/3 of its value. They may want to enlist whoever owns the rights to Queen songs so they have a flash demo of "Another One Bites the Dust" as we seemingly keep getting nothing but cautionary tales from tech stocks.

How much bad news do you have to get before the market adequately prices it all in? By the way, can you imagine what Morgan Stanley brokers are trying to tell clients that listened to the call?

Jon C. Ogg
July 13, 2006

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