Is Digital River Still Really Cheap

At the end of 2004, Digital River's (NASD:DRIV) stock traded at about $43. That's where it is now. Since financial results have improved so markedly, investors have to wonder whether the stock was way too expensive then, or too cheap now.

The numbers for 2004 were fine. Revenue was $154 million and operating income was almost $35 million. But, since then, the company turned in a 2006 performance with revenue of over $220 million and operating income of nearly $67 million.

After turning in such solid numbers, the company raised guidance for Q1 2006 on March 21. Digital River did get some bad news the next day when DDR Holdings filed a patent lawsuit related to e-commerce outsourcing systems. The same day, the company placed four million of its shares in a private placement and raised $170 million. The company said this would be primarily for acquisitions, but it was dilution nonetheless.

Digital River works in e-commerce outsourcing. It also builds and manages online businesses for more than 40,000 software publishers, manufacturers, distributors and online retailers. And, these businesses got off to another good start in 2006.

Revenue for Q1 was $78 million, a 43% increase from the same period a year ago. Operating income rose to almost $21 million. The company said revenue for Q2 would be $70 million and $300 million for the full-year 2006. Some investors thought that good results just weren't enough and took the share price down 7% to $43.48.

Digital River still trades near its 52-week high of $48. The 52-week low is $22.43.
But, looking back, if the stock was anywhere near fairly priced in late 2004, it is likely to be worth a look today. The results have gotten that much better.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Semitool Get Decapitated

Semitool (NASD:SMTL)is a manufacturer of wafer processing equipment for the semiconductor industry. The company is active in the design, development, manufacture and support of high performance wet chemical processing equipment for use in fabrication of semiconductor devices. It's been a good business.

Revenue has moved up smartly over the last three years. The company's fiscal ends on September 30. Top line in 2003 was $117 million, followed by nearly $140 million in 2004. In the last fiscal year, the number rose to over $190 million and operating income hit $10.7 million.

In the first quarter of the new fiscal year, revenue jumped to over $55 million, but higher R&D costs dropped operating income to $162,000. It had been as high as $4 million in the March 31, 2005 quarter.

Last week, the company announced fiscal Q2 which ended March 31. Revenue moved up again to almost $64 million from $46 million a year earlier. But, gross margins dropped from 52% to 47%. The company said the margin pressure was from investment to expand the customer base for a new product line. Income from operations did jump to over $6 million an increase of about 50% over the same period a year ago.

But, once the markets saw Semitool's guidance, the long knives came out. The range was $59 million to $62 million with gross margins in the 47% to 48% range. The stock lost over 15% of its value, falling to $9.29. The 52-week high/low for the stock is $14.00/$7.58.

There is nothing in the Semitool numbers or comments to indicate that the margin pressure and flattening of revenue are permanent conditions. If the company can show that it can begin to grow again after mid-year, the stock is cheap at these levels.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Convera, Get Shorty

Convera (NASD:CNVR) has the very rare distinction of having a days-to-cover short interest ratio of 50. Even though the stock trades a healthy average of nearly 135,000 shares a day, the short interest in the company's common is 6,767,000 shares as of April 13. That's a lot of bets against the company's prospects.

Convera is a provider of search technologies to commercial enterprises and government agencies. Its two major products are Excalibur, a newly developed Web search solution and RetrievalWare, its enterprise search product. The company has a very impressive Fortune 1000 customer list and a number of overseas customers as well.

But, something is wrong with the picture. Convera has been leaking revenue and losing money for years. Revenue in fiscal 2004 (ending January 31) was $29.3 million. In 2005, it was $25.7 million, and for the year ending January 31, 2006 only $21 million. The company had an operating loss in each year and in the latest year it was $14.9 million.

The quarter that ended on January 31, 2006 was shockingly poor. Revenue was only $3.6 million, down 43% from a year earlier.

Convera recently did a private placement of almost $37 million. Given how poorly the company is doing, it should hope that these investors have not joined the groups shorting the stock to protect their positions.

The company claims its most recent troubles are due "to continuing transition from a pure enterprise search software concern to a more diverse search provider offering a professional grade Web-based search technology through its Excalibur solution". It would appear that this in one in a long line of excuses for poor performance.

Convera's stock trades at $7.90, on a 52-week high/low of $20.20/$3.92. The company's market cap is still almost 20 times sales.

How it ever got that high is a mystery.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Neoware's Bright Prospects

Neoware Inc. (NASD:NWRE) designs enterprise thin client solutions and related software and services for a broad range of customers. Wikipedia defines "thin clients" as "a computer (client) in client-server architecture networks which has little or no application logic, so it has to depend primarily on the central server for processing activities". The Neoware products run any Windows, mainframe, midrange, UNIX, Linux, or Internet application on smart, solid-state appliances across a wired or wireless network. In an era when many applications run on the server-side instead of using the CPU of the customer device, the Neoware product line has a lot of appeal.

And, the company's numbers show it. The company's fiscal 2003 (ending June 30) revenue was $57.5 million followed by $63.2 million in 2004 and $78.8 million in 2005. The company had an operating profit in each of these years with the 2005 number hitting $10.3 million. Revenue continued its climb in the new fiscal year with the September 30 quarter hitting $26.5 million and December at $29.3 million. Operating profit in this December quarter was $3.7 million.

Investors did not like what they saw in the fiscal third quarter ending March 31. Revenue was $27.8 million, up 46% from a year earlier but down a bit from the immediately previous quarter. Operating income was $3.1 million, a disappointment.
Wall Street revolted, sending the stock down almost 17% to $21.58. The 52-week high, reached a few weeks ago is $30.95. The stock still trades at more than twice the low for the period which is $9.06.

Neoware has significant strategic marketing relationships with IBM (NYSE:IBM) and Lenovo. The good news is that these get Neoware access to a huge reservoir of customers. The caution is that revenue concentration with a few large customers is not always a good thing.

With $111 million in cash, and a business model that matches the trends in moving computing to servers and away from clients, it is hard to bet against Neoware. With a market cap of only $362 million, the best is yet to come.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Dot Hill Trips Up

Dot Hill Systems (NASD:HILL) announced last week that Sun Microsystems (NASD:SUNW) "has informed Dot Hill of its decision to move potential future supply of a new, low-end, entry-level storage product to another party". Both companies were careful to note that Dot Hill is still a strategic supplier to Sun, but the market did not go along with the act, dropping Dot Hill's stock by over 21% to $4.51. The stock hit a 52-week low of $4.00 during trading on the same day. The 52-week is $8.25

Sun may be the least of Dot Hill's problems. Revenue growth has been non-existent for over a year. Revenue for calendar year 2004 was $239 million and the company had an operating profit of over $10 million. In 2005, revenue dropped to under $234 million and the company had an operating loss of over $2 million. For Q4 06, revenue was $56 million and the operating loss was over $4 million. The company reported operating profits in both Q1 and Q2 of 2006, before turning to a loss in quarters three and four.

Dot Hill's business is to provide flexible storage systems and responsive service and support to OEMs and system integrators. The company claims to have over 100,000 systems in use worldwide.

The company has been besieged by investor class action suits involving the company's restatement of 2004 earnings and the CEO stepped down in February. Crossroad Systems has also filed a patent claim against Dot Hill.

The number of negatives facing the stock are considerable. If earnings for Q1 06 are even slightly disappointing, Dot Hill could drop further.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Is Conexant Rolling Again?

Conexant Systems (NASD:CNXT) beat Wall Street's expectations for its fiscal second quarter (March 31, 2006) and Robert W. Baird & Co. initiated coverage with an "Outperform" rating. All in one week.

The company, which makes semiconductors for modems and xDSL, has been in the dog house for some time. A little under a year ago, the stock dropped to $.95. And, no wonder. In fiscal year 2004, which ended September 30, 2004, revenue hit $902 million, up 50% over the prior year. But, for fiscal 2005, revenue fell to $723 million. But, by the December 31, 2005 quarter, revenue had recovered to $231 million and the company's operating loss was down to $16 million.

Fiscal Q2 seemed to be another breakout quarter. Revenue was $243 million, up 43% from a year earlier. Excluding special charges for litigation with Texas Instruments (NYSE:TXN), operating income was close to breakeven with a deficit of about $3 million. On the same basis a year ago, the operating loss was about $47 million.

The company also completed a $200 million convertible offering during the quarter and is using the proceeds to pay down debt due early next year.

Conexant guided that revenue for fiscal Q3 (June 30, 2006) would be up 3% to 5% over the March quarter.

The company's situation is improving, but is far from perfect. Current liabilities exceed current assets by $174 million. The company has $853 million of convertible subordinated notes. In the current litigation with Texas Instruments, TI was awarded $112 million in a jury verdict in February. Because there is a second phase to the litigation, the court has not entered a judgment with regard to the jury verdict. Which means there is still a great deal of risk.

Conexant has had some strong customer "wins" recently with companies like LG Electronics and Humax. It's period of shrinking revenue seems to be behind it. And, the stock reflects it. Recently shares hit $3.59, near the 52-week high of $3.90.

But, Conexant is not out of the woods yet. The stock traded above $15 in early 2002, and to move beyond where it is now, the issue with TI has to be settled and the company has to demonstrate it can make consistent profits.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Boston Communications Group Fights For Its Life

Boston Communications Group (NASD:BCGI) makes billing and payment solutions for the wireless phone industry. Three of the companies largest customers (Verizon, Cingular, and Alltel) are migrating off the company's platform to alternatives. That has been very bad news for investors. Two years ago, the company's stock was well above $10. It has a current 52-week high of $6.25 and now trades for $2.35.

Boston Communication's market cap is about $42 million, or about half the current annual revenue run rate. The company has $28 million in cash. The company has $64.3 million reserved for a lawsuit with Freedom Wireless, which is in the U.S. Court of Appeals. However, the company says that the cost of the suit could be more than the current judgment against it, which is $165 million.

The migration of large customer has really hurt. In both 2003 and 2004, the company's revenues were over $100 million and operating income in each year was around $25 million. Revenue for Q1 06 was $24.7 million, down 6% from the immediately previous quarter and the Q1 05 number. The company had an operating loss of $755,000. During the quarter the company lost 340,000 subscribers, taking its total down to 3.75 million.

The company guided downward for revenue in Q2 06 because Verizon and Cingular are still in the process of moving their business. Sprint is becoming a larger customer for Boston Communications, and this could help offset the lose of business from the other large clients.

Unfortunately, the fact of the matter is, if the ruling against the company in the Freedom Wireless patent suit is upheld, the Sprint business is not enough to save the company.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Centillium's Hard Road

Centillium Communications (NASD:CTLM) is a semiconductor company that makes products that help improve solutions for the "last mile" of broadband including DSL, fiber to the home, and VoIP installations. The company does most of its business is Japan (65%) and DSL companies are its largest customers (82%). These markets are expanding, so they would appear to be a fertile place to do business.

Not so for Centillium.

Revenue for Q1 06 was $20.3 million, about the same as Q4 05, and up a bit from the same period last year when the number was $17.2 million. The operating loss for the quarter was $895,000, again very close to Q4 05.

The company has been doing a shrinking act over the last few years. Revenue in 2003 was $125 million. In 2004, $71.2 million, and last year $76.1 million.

At the end of the quarter, Centillium has cash and equivalents of $63 and no debt. During the period, the company also came to market with several new products for DSL, integrated VoIP and optical technology, and end-to-end fiber to the home solutions. But, it needs for these to sell well in the next two quarters to show it can rekindle revenue growth.

Centillium stock trades at $3.80. It hit its 52-week high of $5.13 recently. The low for the period is $1.90. Centillium has a market capitalization of $155 million, about 2.5 times sales, which makes it fairly cheap.

But, it is likely to stay cheap until it shows it is on its way back to a $125 million year again.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Tollgrade's Big Sleep

Unless the CEO at Tollgrade Communications (NASD:TLGD) has a beard, nothing much at the company is growing. Tollgrade's description of its business is that it provides "solutions which currently manage the test process for over 200 million access lines and are the foundation for broadband service assurance within RBOCs, MSOs and numerous ILEC/CLECs". Tollgrade products provide over 20 million automated transactions a month, according to the company. And, one of the its most important platforms is used on over 250 telco and cable systems worldwide.

All of this sounds like big business, but it isn't going anywhere.

Tollgrade's revenues have hardly moved for three years. In 2003, the top line was a little over $65 million. In 2005, it was $66.3 million. Last year, the company had a modest operating profit of $3.5 million. After a weak Q1 05, revenue rose to about $17 million in Q2 and Q3, and made a slight advance to $18.2 million in Q4. In that final quarter of the year, operating income was $2.3 million.

So, with that a prologue, the company announced Q1 06 with revenue of $17.6 million and a loss from operations of $719,000. Revenue down from the immediately previous quarter, and operating income gone.

Tollgrade guided for the second quarter of 2006 to be between $14 and $17 million. That's a pretty wide range that looks bad at both ends. Referring to Q2, the company CEO said "we continue to have several distinct projects included in our forecast which are subject to competitive elements, customer budget availability and product acceptances". In other words, our sales staff is not sure if customers will buy the products they are testing or have budgets to make purchases even if they like the results. Plain English, please.

Tollgrade has about $58 million in cash and cash-equivalents, so their balance sheet is fine. The stock has dropped from $16.24 in March to $11.70 now. The 52-week low is $7.03, and, if the company does not come out with some better news, that may be where it is headed again.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

eResearch Technologies Perfects The Art of Disappointment

eResearch (NASD:ERES), which provides centralized core-diagnostic electrocardiographic (ECG) technology and services to evaluate cardiac safety in clinical development, is getting very, very good at disappointing investors. The company is also in the business of providing technology and services to streamline the clinical trials process allowing its customers to automate the collection, analysis, and distribution of clinical data in all phases of clinical development. And, the appeared to be a promising business as recently as 2004, when revenue hit $109.4 million with operating income of $49.5 million. A really fantastic performance.

In the summer of 2004, the stock got close to $30. But, as 2005 passed, the numbers started to turn South. For the full year, the company had $86.8 million in revenue and an operating profit of $23.4 million. The best quarter was Q4, with revenue of $25.4 million and operating profit of $8.1 million. Nowhere near the 2004 margins.

The first quarter of 2006 was not terribly pretty. Revenue was $21.4 million and operating income was $2.8 million. Revenue dropped from the immediate previous quarter and the lovely margins almost disappeared.

Guidance for the next quarter is for $25 to $27 million. That would be a solid improvement over last year. But, investors don't seem to be listening. The stock, which had a 52-week high of $18.54, is now near its low for the period, trading at $11.

And, with the big revenue and margins of 2004 now a thing of the distant past, who can blame the sellers.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Overstock's Crazy Numbers

Overstock (NASD:OSTK) is a strange company. Not because of the odd activities of its CEO, but because it seems, no matter how high revenue goes, the company cannot make money. Maybe that is why, on a 52-week range of $21.60 to $48.65, it now trades at only $28.50.

Last year is an object lesson. Revenue was up sharply from the year before, going from $494.6 million in 2004 to $803.8 million according to Yahoo!Finance. And, the company's operating loss actually increases from $4.9 million to $23.8 million. That's very hard to do.

The trend continued for the online retailer as the Overstock announced each quarter during last year. Revenue in each of the first three quarters was relatively flat when compared to one another. The range was $150 million to $169 million. Operating loses ran between $3.5 and $9.5 million.

Then, Overstock hit its big Q4 holiday quarter. Revenue jumped to $318 million and gross margins were consistent with past quarter, but expenses rose sharply and the operating loss was $5.4 million.

Overstock's growth in revenue and gross profit has been very impressive, but investors have to ask what the value of the stock is when the company has a big breakout quarter in revenue and can bring none of it to the bottom line.

Wall Street should not focus on the circus around the odd activities of Overstock's CEO and worry about whether the company can every show that it can be profitable. Based on the numbers, it is a very fair question to ask.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Amkor Technology's Glad Tidings


Amkor Technology (NASD:AMKR), the provider of advanced semiconductor assembly and test services, announced another strong quarter today, setting it apart fom a number of other companies in the industry. Most aspects of the company's microelectronics design and manufacturing services did well.

Revenue rose sharply from Q1 05, moving up to $645.1 million from $417.5. Operating income was $85.3 million compared to a loss of $76 million a year ago, which included a $50 million contingency for legal settlements. The company said Q2 06 sales could be up as much as $4% over Q1.

The quarter adds to a record of consistent growth at Amkor. Revenue in 2003 was $1.604 billion. In 2004, that rose to $1.901 billion. In 2005, growth slowed somewhat to $2.1 billion and operating profit dropped to $29.9 million from $109.2 million in 2004. But, based on Q1 numbers and guidance, its would appear that operating profit is marching upwards again.

Despite a rise in the company stock that took the price from a 52-week low of $2.87 to the current high of $12.50, the company still trades at only .93 times sales. The company does have over $1.9 billion in debt. The company said it is in the process of paying down some of these notes and the $39 million in free cash flow generated in Q1 should help. Interest expense during the quarter was over $41 million.

Amkor is doing well, very well. If it can continue its growth and demonstrate that it can improve a balance sheet that is probably not the envy of the industry, the stock has the chance to trade above one time its sales. But, the getting the debt down may well be the key.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Agere At The Rubicon

Agere Systems (NYSE:AGR), which makes semiconductors for storage, wireless data, and public and enterprise networks, had a bit of a rough fiscal Q2 (ending March 31 2005). The company has some nifty products. They make ASICS for Ethernet switching, storage area networking, wireless infrastructure and imaging. Agere also makes platform designs and integrated solutions that have made their way into millions of wireless handsets. They company also designs integrated circuits for hard disk drives.

Unfortunately, the company just can't seem to ramp revenue. In its fiscal Q2, the company delivered revenue of $397 million. However, a year ago revenue was $417 million and in the December 2005 quarter it was $403. Guidance for the June quarter has a low end of $390 million. None of the company's reporting segments showed any progress from the previous quarter. In the earnings announcement, Agere's CEO spoke of "strong underlying growth", but it was hard to find that in the numbers or guidance.

The company had an operating income loss of $15 million which was better than a year ago, but on par with the last quarter. Guidance is for EPS to be at least breakeven in the current quarter.

The market seemed pleased with company guidance and moved the stock up almost 8% to $15, near to the 52-week high of $15.79. The low for the period was $8.81.

Agere has not had much luck expanding its business the last few years. Fiscal 2005, which ended September 30, 2005, had revenue of $1.676 billion. The prior year, revenue was $1.912 billion. The company had operating deficits both years.

Agere has now had four sequential quarters of revenue declines. And, the company's cost structure is such so that it is difficult for Agere to make money at these levels.

While the market showed some support for the company's outlook, the stock still trades well below the $25 level where it was two years ago. And, if the company cannot show several quarters that buck the trend of dropping revenue or alternatively cut costs significantly, it is hard to see a case for investors continuing to drive the share price North.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

MindSpeed Takes It Slow

MindSpeed Technologies (NASD:MSPD) joined the army of technology companies that can no longer get a handle on growth. Revenue for Q1 06 (the company's second fiscal quarter) was $34.6 million compared to $33.2 million in the December 05 quarter. Guidance was for the June 2006 to be up as little as 2% over the previous quarter.

The company, a supplier of semiconductor solutions for network infrastructure applications, had revenue of $111.8 million in 2005, down from $119.4 million in 2004. The company's operating loss was $61.6 million last year. The operating loss for the quarter ending March 31 was $6.3 million, so there is improvement in that department. The company does appear to be cutting costs from a run rate of about $30 million a quarter down to about $25 million.

MindSpeed is yet another company with wonderfully inventive technology that has not been able to show much growth. The company's products are marketed in VOIP deployments, network processors and fiber optic components. MindSpeed also makes products of broadcast video components and xDSL. The company has strategic relationships with companies like STMicroelectronics (NYSE:STM).

MindSpeed traded above $6 as recently as two years ago. It then fell to close to $1 in mid-2005. Today, it trades at around $3.75, giving the company a $400 million market capitalization which is about 3.3 times sales. The company has stockholder equity of about $30 million. Solid, but not spectacular.

The problem, it would appear, that many companies like MindSpeed have is that the number of very good hardware products available to the broadband, consumer electronics, and multimedia markets is growing almost daily. Getting differentiation is becoming more difficult, and pricing is, in most markets squeezed. In this environment, growth is only gained very dearly, if at all.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

JDA Software's Moving Pieces

There was a lot of news out of JDA Software (NASD:JDAS) in a remarkably short period of time. First the company announced that revenue and gross margin both dropped in Q1 06 compared to the Q1 05. Revenue went from $50.3 to $47.9 million and gross margin from $28.7 to $26.5 million. The company reported an operating loss of $290,000, about the same as a year ago.

The company's reason for the bad results was simply stated. "The first quarter was a disappointing start to 2006 with a significant number of deals failing to close in our projected timeframe," commented Hamish Brewer, JDA chief executive officer. The company maintained its guidance for the year. But obviously the prospects for hitting the numbers are statistically less likely than they would have been if JDA had turned in reasonable numbers in the first quarter. The company did generate $5.1 million in cash from operations in the period and now has $118 million on the balance sheet.

JDA's central product offering enables high performance planning, promoting, flowing, pricing, managing and selling of finished goods from the supplier warehouse to the consumer. The demand for the products has not grown for three years. In 2005, the company had revenue of $215.8 million and operating profits of only $1,865,000.

Investors could certainly make that argument that JDA is struggling a bit and the stock, which has been trading between $10 and $18 since early 2004 would confirm that. Shares change hands at about $14.50 now.

But, earnings were only the beginning of the story. The company also announced it was buying Manugistics (NASD:MANU), a leading global provider of synchronized supply chain and revenue management solutions, for $211 million in cash. Manugistics was trading for about $2.35 the day before the offer, which is for $2.50 a share.

Manugistics has some pretty ugly financial statements. In the last fiscal year, which ended on February 28, 2005, revenue was $193.1 million and the company had an operating loss of $47.2 million. The top line for the 2005 fiscal year was below 2004, which was below 2003. In the current fiscal year, revenue has dropped steadily by quarter. In the November 30, 2005 quarter it was down to $39.9 million. The operating loss was $3.6 million. On May 11, Manugistics will announce results of the quarter that ended February 28, 2006. The company said it expects to make between $2.5 and $3.5 million on revenue of $44 to $46.5 million. That revenue would be about flat with last year.

Manugistics has about $123 million in cash and long term debt of $187 million, most of it convertible securities. So, it would be hard to say that JDA is using the acquired company's capital to help finance the deal.

JDA trades at about two times sales. Manugistics has a ratio of 1.1 times. To that extent the metrics of the purchase make some sense. The fact that the companies are in closely related businesses, and that there are duplicate costs, is beyond dispute.

However, taking two companies, neither of which is doing terribly well, and putting them together may not solve the problems of either.

For the time being, investors should probably not expect JDA's stock to head much above $15.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Xerox Fails To Reproduce

Xerox Corporation (NYSE:XRX) has come in for a lot of praise recently, even being called the greatest turnaround since Chrysler.

Maybe that's a stretch.

Revenue for Q1 06 dropped slightly from $3.771 billion last year to $3.695 billion. Operating profit fell from $210 million to $200 million. Not all the news was bad. "Our steady improvement in post-sale revenue shows that Xerox's business model is working. We also delivered solid product install growth, a more than 25 percent increase in signings for document management services, and 11 percent growth in revenue from Xerox digital color systems," said Anne M. Mulcahy, Xerox chairman and chief executive officer. Since the company has been focusing on the sales of these systems for the past several years, this actually appears to be part of a long term positive trend. But unit sales for some products did drop.

It is a bit hard to swallow Xerox as a real turnaround story. Revenue has been flat for three years at about $15.7 billion a year. The final quarter of last year was strong with revenue of $4.25 billion and net income of $282 million. But, now the company is faced with the issue of whether the next quarter or two will be much better than the Q1 disappointment.

If the answer to the question is "no", then Xerox's stock has little room to run. The share price has traded in a range of $12.40 to $15.78 over the last 52-weeks and now sits at $14 with little excuse to move much one way or the other.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Silicon Labs Continues To Underperform

The reasons for the rise in Silicon Laboratories, Inc.'s stock dwindled further again today. Silicon Labs (NASD:SLAB) engages in the design and development of analog-intensive mixed-signal integrated circuits. Revenue for Q1 06 came in at $114.5 million. Last year, the number was $104.7 million and in Q4 05, revenue was $109.9. Guidance for Q2 06 is $116 to $120 million.

There was not much movement in the revenue numbers as the company moved quarter-to-quarter in 2005, and the 2005 top line was actually below 2004. Operating income did not move much in the 2005 quarters either with the exception of a sharp drop in Q3, due to high R&D costs.

Operating income in Q1 06 was $11 million. A year ago, it was $19.8 million. With stock-based compensation backed out, operating income would have been flat at $20.8 million.

The company's mixed-signal ProSLIC business grew 60% from the same quarter a year ago. The company also said that its mobile handset business improved. But, based on overall growth, that means there must have been some lines of business that did not do particularly well. The company did not waste any ink on those issues.

The open question about Silicon Labs is how it is possible that the stock can be doing so well? Last May, the stock was at $24.62 and it rose to $60 in April, an extraordinary run given the mediocre financial performance of the company. The Q1 06 news was viewed as negative, but the stock is still above $50 and still trades at 7.3 times sales.

You can't fight gravity forever.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

optionsExpress Beats The Big Guys

optionsExpress (NASD:OXPS) specializes in offering online customers the ability to trade equity options, stock and bonds. The market is competitive with companies like Schwab and ETrade operating with huge marketing budgets and lots of customers. That has not seemed to cramp the style of the folks over at optionsExpress.

The company's first quarter was a barnburner. Revenue hit $46.4 million, which was up 73% over the same quarter a year ago. Income before taxes rose 82% to $29.6 million. You have to admire a business where 64% of revenue goes to the bottom line. Schwab (NASD:SCHW) said its Q1 pretax margins were 31.2%

optionsExpress also said customer accounts rose to 178,700, 53% ahead of a year ago. Customer assets rose to $4 billion, an 84% lift.

Daily average revenue trades, a critical metric in the online brokerage business rose to 29,400 up from 16,500 a year ago and up from 24,200 in the last quarter of 2005.

optionsExpress did say that advertising expense per new customer account did rise to $111 from $86 a year ago, but customer trades per account rose to 43 from 37. So, the cost to acquire a customer has gone up some, but the trading yield on each account has also gone up.

What's wrong with this picture? Not much. optionsExpress is obviously benefiting from the increase in trader sophistication as investor move from bread-and-butter stock trades to equity options. The growth in revenue and operating income since 2003 has been remarkable and margins have increased, so the model has leverage.

optionsExpress trades near its 52-week high sitting around $32 now, up from a low for the period of $12.48.

No one should be surprised if it goes higher.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Hutchinson Does The Limbo

Hutchinson Technologies (NASD:HTCH) stock dropped near its 52-week low as news of its fiscal Q2 was released covering that quarter ending March 26, 2006. It's a bit surprising that it did not happen earlier. Hutchinson makes suspension assemblies for disk drives. Revenue growth has been a little choppy at the company, but it rose from $470 million in the 2004 fiscal (September 26, 2004) to $632 million in fiscal 2005. Operating income also rose from $38.9 million to $57.4 million.

The first quarter of the new fiscal (ending December 25, 2005) revenue rose to $185 million from $158 million in the immediately previous quarter. Operating income had already been dropping due to increased costs or R&D and a sharp spike up in cost of revenue. After hitting $20.7 million in the June 26, 2005 quarter, operating income dropped to $4.4 million in the December 2005 quarter despite a revenue increase of $15 million.

All of this pressure on margins took the stock down from $43 last summer to $24 in November 2005. Over the last several months, the stock has inched back above $30.

But, then the company announced its fiscal second quarter which ended March 26, 2006. Revenue jumped smartly to $186 million from $158 million a year earlier. However, the gain from the immediately previous quarter was only about $1 million. And, operating income was only $6.8 million.


Guidance for the current quarter is for revenue to run between $175 and $185 million, and margins to be between 19% and 21%. In other words, more of the same. Hutchinson has said that disk drive sales for 2006 are expect to grow between 12% and 17%, and that suspension assembly demand tends to track these numbers. What the company is less forthcoming about is why its gross margins, which were 30% a year ago, have fallen so far without near-term prospect for recovery. Hutchinson's statement says that its business mix has moved to advanced products that are currently more expensive to produce, but it is too large a change to explain away in a couple of sentences.

Until that issue is resolved, the Hutchinson stock is unlikely to go anywhere.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

PDF Solutions Slows To A Walk

PDF Solutions, which provides process-design integration technologies for integrated circuits, seems to have joined the club of high tech companies that lost their ways in 2005 and early 2006. It's rapid growth rate now seems a thing of the past.

After a scorching revenue run that took the top line from $42.5 million in 2003 to $73.9 million in 2005 when the company had its first operating profit bringing in almost $5 million, the revenues for the quarters in 2005 simply flattened out. Each quarter was between $18 and $19 million.

The first quarter of 2006, the company brought in revenue of $19.9 million, after doing $19 million in that last quarter of 2005. Net income was $268,000 compared to $1.4 million in Q1 05. Stock-based compensation was the major culprit for the drop. The company's cash balance is still in good shape at $65 million.

The company's business of providing semiconductor companies systems that make integrated circuits easier to manufacture actually appears to be a solid model. But, PDF Solutions has certainly joined the legions of companies that can no longer go to Wall Street with growth stories, and that makes the road ahead extremely difficult for investors.

After reaching $19.99, it's highest point since 2002, the stock dropped below $14 on the Q1 news. The company still sports a health market cap of $370 million, or almost seven times sales. And, it is quickly joining the league of companies that can no longer support those valuations.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

The Mystery Of Gene Logic

Gene Logic (NASD:GLCG) is a difficult business to understand. Not that its model is overly complex. The company according to its own direct description "provides a broad portfolio of preclinical services to assist drug developers with compound evaluation, from selection through clinical development. We conduct preclinical studies of all sizes and degrees of complexity in our 100,000 square feet of laboratory and support space". The company also develops software and gene expression data bases. OK. Straight-forward and fair enough.

Revenue has gone up modestly over the last three year, from $69.5 million in 2003 to $75.9 million in 2004 to $79.4 million last year. But, the company hemorrhages money. It's operating losses over this period were in excess of $100 million.

In the first quarter of 2006, matters went from bad to worse. Revenue dropped from $19.7 million in Q1 05 to $12.8 million this year. Operating expenses rose from $17.2 million to $18.7 million. Net loss was $11.8 million compared to $4.1 million a year ago.

Cash and cash equivalents dropped from $82.1 million on December 31, 2005 to $63.9 million at the end of Q1. The company's reaction? "The Company does not expect the unusually large decline in cash reported for the first quarter to be representative of cash usage for each of the remaining quarters in 2006." Let's hope not. That could make for a very ugly year. The company also said its sales pipeline is robust, but no one seemed to believe them. Shares were beaten down 26% to $3.10 getting close to the 52-week low of $2.75. The high for the period is $5.90.

At this point, the company does not seem to be able to make any realistic case for its business or give lucid plans for being profitable in the foreseeable future. It may be that the company's only good fortune is that the stock has not gone down further.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Cree's Big Slowdown

Cree (NASD:CREE) makes LED chips for devices like cellphones, camera flashes and car dashboards. The company claims that its lead in this field is due to "unrivaled materials expertise in silicon carbide (SiC) with gallium nitride (GaN) to deliver chips and packaged devices that can handle more power in a smaller space while producing less heat than other available technologies, materials and products". Cree's market has grow quickly. In the fiscal year ending June 30, 2003, the company's revenue was $230 million. In the fiscal year 2005, the number jumped to $389 million. Over that period, net income almost tripled to $91.1 million.

As the company moved into its current fiscal year, growth slowed considerably. In the June 05 quarter, revenue was $98.9 million. The September 2005 quarter revenue was $103.9 million and for the December 2005 quarter, the top line barely moved up to $104.7 million. Net income for this last quarter was $17.8 million, the lowest of the calendar quarters in 2005.

Oddly enough, the stock price at Cree does not seem to reflect the slowdown. As The Motley Fool (www.fool.com) pointed out recently, Japan-based Nichia has about 80% of the LCD backlight market, which is one that is critical to Cree. But even with this kind of competition, the stock has kept up its run. After dropping to $21.68 in October 05, it moved up to $31.30 fairly recently, a 63% rise in a short time.

Cree recently demonstrated that its growth record is in real trouble.

For the fiscal third quarter, ending March 26, 2006, revenue rose only 2% from the immediately previous quarter, to $107.7 million. Net income was $24 million.

Guidance was for insignificant growth. The current quarter will only be in the $106 to $110 million range. The company said this was due in part to relocation of some production facilities.

Given the significant slowing of Cree's business, the market reaction was surprisingly muted. The stock dropped less than 11% to $30.40. In other words, it still trades 40% above its 52-week low late last year.

The company has really given no adequate reason for the flattening of its revenue and income, which is now no longer the exception, but the rule.

With the stock still trading at 6.4 times sales according to Yahoo!Finance, one has to wonder why it is not closer to $20 than $30.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Can LSI Logic Turn Around?


LSI Logic (NYSE:LSI) has been bandied about as the next hardware turnaround. The newly minted CEO has said that the company "plans to focus its business on growth opportunities in the information storage and consumer markets, increasing associated research and development investments, while redirecting R&D from non-core areas and reducing associated selling, general and administrative expenditures". This means that some of the old platforms had to go. So, LSI intends to fund additional R&D investments in its primary markets by redirecting ongoing investments in its RapidChip platform ASIC technology. That means that the RapidChip platform is dead.

Some of the early signs of a change in fortunes for LSI are there. Revenue for Q4 05 rose 21% to $506 million. Net cash form operations nearly tripled for the entire year 2005 to $260 million. The company also reduced its convertible debt during the year from $782 million to $624.

But, guidance for Q1 06, with final numbers to be released shortly, was only in a range of $465 to $490 million. Last year Q1 was $450 million, so that is not much progress.

All this talk and early good results have taken the stock from $5.15 a year ago to $10.20.

The PortalPlayer (NASD:PLAY) hit from Apple (NASD:AAPL) which has took PortalPlayer's stock down over 40% in a day has a ripple effect with LSI which is a supplier to PortalPlayer. PortalPlayer's products will not be in the new iPod mid and high-end players.

And, LSI's exit from the communications chip business, so it can focus on information storage markets, is still a largely unproven strategy. Part of this strategy is the winning new customers with chips for set-top boxes, portable music players and new DVD players. The iPod problem makes that road a tougher one to walk.

LSI is still a work in progress and guidance combined with the iPod issues would tend to indicate that the stock has run too far. The ceiling at around $10 may be there for awhile.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Apple's Kryptonite

Apple (NASD:AAPL) announced its fiscal Q2 ending April 1. Superman seems to be slowing down.

Revenue rose 35% to $4.36 billion and net income was up 41% to $410 million. But, iPod sales and Mac sales came in well below the more optimistic expectations.

Mac sales were 1,112,000. Gartner Group came out with its Q1 PC sales at about the same time as Apple put out earnings, and Mac share in the U.S. market fell to 3.5% in the U.S. from 3.6% a year ago, according to an analysis at marketwatch.com. Much of the hype around the Apple stock has been that Mac share would rise as customers migrate from PCs due to the popularity of the iPod. It looks like that is not happening. If the Intel-based Mac is not a huge success, the platform maintains its position as an "also ran".

Sales of iPods rose to 8,526,000. While these were up from 5,311,000 a year earlier, they were off sharply from 14,043,000 in the immediate previous quarter. Obviously, the holidays helped that quarter, but media accounts indicate that analysts forecast 9 million to 10 million unites for fiscal Q2. A number of people who follow the stock tried to explain this shortfall away. Perhaps customers are waiting for newer versions. Color it however they wish, sales appear to be slowing.

With the pace of iPod sales now questionable and the assault of the Mac on the PC market in doubt, Apple may well have real trouble getting above $70 and staying there.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

EBay Is Doing Just Fine


When EBay (NASD:EBAY) announced its Q1 results, Wall Street promptly pulled the stock price down to levels it has not seen since last August. The stock now trades at 12.5 times revenue. For the sake of comparison, Google (NASD:GOOG) is at 20 times.
Investors can argue that Google may be growing faster, but EBay may have fewer real competitors.

Revenue for the first quarter was $1.390 billion up from $1.032 billion a year ago. Net income was $248 million down from $256 million. However, non-GAAP operating income with adjustments for items like stock options rose to $461 million from $367 million.

All of that news actually looks pretty good, but the markets were troubled by guidance. Revenue for Q2 will be $1.370 to $1.415 billion and for the year 2006, $5.7 to $5.9 billion. The news took 8% off the EBay stock price. According to Yahoo!Finance, last year EBay did $1.086 billion in Q2 and $4.552 billion for the year 2005. How many companies can offer this growth rate off a $5 billion revenue base?

EBay is also about to launch a mobile version of PayPal (EBay's business for sending money and buying merchandise), Skype is growing at a rapid pace, and the new EBay Express, a specialty site where items would be available for immediate purchase, product is coming to market.

Not everyone is betting against EBay. According to forbes.com, Standard & Poor's Equity Research is keeping its buy on EBay with a price target at $48.

EBay is still a fast-growing business. Google is starting competing services, but they have done that in other areas, like finance, without an obvious immediate success or impact on competitors.

With its stock below $37, EBay is cheap.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Bottomline Break A Leg, And Both Arms

Bottomline Technologies (NASD:EPAY) revised guidance down today, saying that the first calendar quarter of the year, their fiscal third quarter, would come in at $24.5 to $25 million. Media reports indicate that Wall Street expected over $27 million. The company provides software products and services for financial process solutions across a broad range of industries.

Investors have to go back a quarter to find the really perplaxing news. When the company announced results for its quarter ending December 31, 2005, the top line was $26.1 million up from $24 million a year earlier. But, expenses went up and income from operations fell to $546,000 from $1,111,000 the previous year.

Buried a bit in those numbers was the fact that Bottomline's highest margin business, software licensing, was shrinking. Revenue in that area went from $5.4 million in the 2004 quarter to $3.6 million in 2005. Cost of revenue on this line item only runs about 12%. Margins in the equipment and supply part of the business, where revenue was flat for the quarter, are only 20%, so COR is 80%. The company's largest business, service and maintenance, is growing, but cost of revenue there is 42%.

Bottomline seems to be expanding the wrong business.

The company says it is making a transition to a subscription-based revenue model, and this could have an impact on revenue recognition. The company has also made a couple of acquisitions recently, but they do not seem to be having much of an effect on top line. The company has about $90 million in the bank, so the balance sheet is not an issue.

The stock has put the big hurt on investors, dropping from $18.62, the 52-week high, to below $11. If Bottomline does not come up with some good news soon, $11 could be a ceiling and not a floor.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Symbol Stalls

Symbol Technologies (NYSE:SBL, the designer of enterprise mobility systems, has not seen much movement in its stock lately. Maybe the bar code scanning business isn't considered sexy anymore. And, the company has had accounting and management problems.

After rapid growth from 1996 to 2000, when sales more than doubled to $1.45 billion, the increase in the top line slowed and in five years sales have only moved to $1.76 billion. Operating income actually peaked as long ago as 1999 when it hit $177 million. Operating income in 2005 was only $54 million.

Symbol traded over $30 five years ago. During the current 52-week period, the range has been $8.01 to $14.15 and stands at about $10.90 now.

Fourth quarter revenue was flat to slightly down compared to both the immediate previous quarter and the same quarter a year ago. The top line came in at $439 million. Gross profit margins were fairly steady at 45% and net income was $24 million, below the $28 million plus the year before.

The company has also guided for Q1 06 to be flat to slightly down.

Symbol has announced several new products. One improves wireless coverage and security. Another is a laser bar code scanner aimed at small businesses. Yet another improves tracking of inventory using radio frequency identification. But, none of these have seemed to move the needle.

Symbol has also prevailed in recent patent litigation against Metrologic, but the sum involved, $14.8 million, is not likely to turn any heads.

There is nothing particularly wrong with the Symbol Technologies businesses, but, there is nothing terribly right with them either. Until the company shows that new products can improve revenue or that current products have unanticipated markets, the stock is not likely to move much from around $10.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Google Finance and Yahoo! Finance Fish For Eyeballs

Google Finance (NASD:GOOG) has now been out long enough so that the tires have been kicked and senior management at the parent can see traffic trends and user reaction. And, Yahoo! (NASD:YHOO) knows whether Google has taken any of its prized eyeballs or if its rival's new finance beta has had a rickety start.

Given the traffic that Yahoo! Finance has and the traffic Google could funnel to its new section along with the premium that advertisers are willing to pay to reach investors, the stakes are high. And, the ripple will be felt by other sites like MSN MoneyCentral, Marketwatch, and the Wall Street Journal online edition.

One of the biggest single questions is, given the size of the opportunity, why hasn't either Google or Yahoo! done more to improve their respective financial sections.

The Yahoo! section is already good, but several other websites beat them in features that the big internet company could easily add or improve to pick up traffic. And, if Google wants any chance to become a habitual destination for investors, both professional and private, one would think that they would have benchmarked the best of the web to have a set of features that would place it well above the competition.

Some of these features are not at either site. Cost is one factor for adding many items, but with huge traffic at stake, one of these companies may simply spend the money and expect to move traffic and ad revenue from competing sites.

Here are some items that are certainly are being reviewed at Google and Yahoo!:

1. Set up a search function for the sec.gov database. This combines Yahoo! or Google's search strength with one of the most valuable free financial databases in the world. If the SEC search box on every company came up on its stock quote page, it would be extremely useful. The Yahoo! SEC section carries abbreviated filings and is not very useful.

2. Go to the exchanges and pay them to offer free real time quotes for every stock looked up at the finance section. No one has even done this on a large scale and it would not be cheap, but it would drive massive traffic. It may be that you start out with snapshot and not streaming quotes because the financial deal with the exchanges might be better. The exchanges need the money, and the idea of using 20 minute delayed data in this day and age is a handicap.

3. Set up an exclusive relationship with Value Line or Morningstar to get their
reports, or some section of them, for free. These are some of the most useful
stock analysis tools around. The majority owner of Value Line is in her seventies
so it might even be for sale. The stock screening software at both these sites is better than what Yahoo! has now.

4. Make the stock charts interactive. BigCharts.com does this as well as anyone,
so a look at that site would be useful. Charts that are not interactive have an extremely limited use. Google got started on this with Flash stock charts, but they did not finish the job.

5. Get one or two of the largest brokerage firms to allow their research to be free
on Yahoo! or Google Finance. It would be useful to their broker networks. Some of their institutional clients might not like it, but if even one major research house agrees, the rest will have to look at it.

6. Hire a few really good statisticians and start doing big lists like Fortune, Forbes, BusinessWeek and the Wall Street Journal do. Investors love useful lists. Print lists are usually delayed a few days because of the printing cycle. The Fortune 500 comes out once a year. Why shouldn't there be a Yahoo! Finance 500 every quarter. Good stat people can generate dozens of these lists a month. Investors will find them useful and the publicity drives traffic.

Nothing on this list is inexpensive, but both companies have the resources to make the improvements if they want to. If one of the two companies swings for the fences, it might just become the dominant destination on the Internet for financial information.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

The New York Times Dot Com

The New York Times (NYSE:NYT) bought internet guide service About.com in March 2005. It now has 29 million visitors a month and ranks No. 56 in worldwide web traffic. Between that business and other online operations like nytimes.com, web businesses are now 7.5% of the revenue at The New York Times Company, based on Q1 06 numbers. (About.com was about 2% of revenue for the quarter.) A year ago, the percentage was 4.5%. The revenue pot for the entire company in the period was $832 million.

Operating profit at NYT for the first quarter was $68.3 million, a big drop from $208.1 million a year earlier. But, About.com operating profit was $7.6 million, and this does not include the contributions from other online properties which are not broken out. So, online operating profits were over 11% of of the NYT total. With contributions of web operations beyond About.com, which are not shown as a separate line item, one might surmise that they were much higher.

The balance of the business was very rough. The New York Times newspaper barely grew in the quarter. The New England Media Group portion of the company saw a 7.2% drop in ad revenue. Broadcast revenue was essentially flat.

Making the case that the newspapers or broadcast properties are going to get The New York Times Company out of the woods is almost impossible. The stock market has all but given up on the company. The share price, which was above $45 two years ago, now stands at $25. One large instititional investor, Morgan Stanley Investment Management, is on the war path because of the poor results.

The most troubling aspect of the situation at The New York Times Company is that it does not effectively use the large circulation of its newspaper products like the daily paper or nytimes.com to promote traffic to About.com. And, that's an important tactical mistake. Improved traffic will almost certainly increase revenue at a greater rate during a period when the company really needs it..

With the stock going down at the current pace, investors should hope the company will do whatever it can to promote the most financially promising business under its roof. The goal for the NYT and all the other major newspaper companies should be to have online revenue replace attriting newspaper advertising and circulation revenue faster than these disappear.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Has McClatchy Been Thrown Out At First?

McClatchy's (NYSE:MNI) purchase of Knight-Ridder (NYSE:KRI) is beginning to look more harebrained by the day. It is probably too late to get out of the deal now.

McClatchy paid $4.5 billion for its larger rival, taking on $3.75 billion in bank debt for the purchase plus $2 billion in Knight-Ridder debt, according to media reports.

Knight-Ridder has just announced Q1 05 results. Revenue came in at $740 million, a slight uptick. Operating profit was $88 million down about 16%. Knight said that the average cost of its debt during the quarter was 6.2%. Expensive.

McClatchy plans to sell twelve of the newspapers it is buying. Ad revenue at these fell .4% during the quarter the while it rose slightly at the papers they intend to keep.

McClatchy's own results for the first quarter were no better. Earnings dropped from $32.2 million a year ago to $27.7 million in 2006. Revenue was essentially flat at $282 million.

The really depressing thing about the reports from the two companies was the decline in circulation. For the first quarter, McClatchy saw daily circulation drop by 2% and Sundays by 4.4%. At Knight-Ridder, daily circulation was down 4.3% and Sundays by 4.4%. Seems like a trend.

Unfortunately, even though both companies are beginning to get traction with online revenue from digital versions of their products, the relentless slide in paid circulation at the papers is simply eroding the revenue base too fast.

The value of the papers McClatchy bought and those they intend to, in turn, sell to reduce debt is attriting, and it is showing up in the stock price.

A year ago, McClatchy's stock price was almost $76. The day before the acquisition, the stock traded at over $53. It has now dropped to just above $44. At least the volume has picked up.

The chances that the McClatchy stock will rise much from here will be based to a large extent on whether they get a good price for the Knight-Ridder papers that they intend to sell off. Given the trends, it doesn't look good.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Stamps.com's Wacky Multiple

Please don't misunderstand. Stamps.com (NASD:STMP) has a nifty business. The company is one of the leading providers of Internet-based postage services. Maybe the leader. The company's PhotoStamp products, which allow people to put their own photo content onto their postage stamps, is a hot idea and the company shipped about seven million PhotoStamps in Q4 05, a big increase over previous periods.

Revenue last year rose from $38.1 million in 2004 to $61.9 million, a 62% clip. The fourth quarter grew even faster with revenue up 76% to $20.6 million. For the full year the company had income from operations of $8.4 million compared to a loss of approximately $7 million in 2004.

But, guidance is for things to slow down a bit. The company expects 2006 revenue to be between $75 and $90 million, a pretty wide range, and much slower than either Q4 05 or full-year 2005 growth. At the lower end of guidance, the Stamps.com's revenue would only go up 21%. Talk about full flaps.

Stamps.com's stock has gone from $15.05 in the 52-week period to almost $37. With a market cap that is nearly 14 times revenue, this puts them well ahead of companies like Yahoo! (NASD:YHOO) and EBay (NASD:EBAY) in that department.

It is worth noting that Stamps.com devotes a lot of space in its 10-K to Pitney Bowes (NYSE:PBI) as a competitor. The Pitney Bowes postage meter business gets hurt by a service like Stamps.com, so the business equipment behemoth has made several attempts to move into the online end of postage. It's probably safe to assume that they are not going to give up.


Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Digital Music Group's Late Start


Digital Music Group (NASD:DMGI) went public in early February of this year and the stock moved up to $10.42 within a few days. It now trades at about $8.50. The amazing thing about Digital Music is that it lost money on $1,056,000 in revenue last year, but has a market capitalization of over $73 million. Investors would be hard pressed to find many companies with ratios that high, which lends a lot of risk to the company share price.

The company claims to have 65,000 recordings available to the online music stores, like iTunes, who are the company's customers. However, this is in a market with over 2 million available recordings, most of them coming directly from the major music studios, who are a tough crowd and are hungry to make money online.

Digital Music describes its library this way: "Our music recordings are from various genres and time periods and primarily include back catalogue, out-of-print recordings, past hits, world music, classical music performances, previously unreleased music recordings, live performances, and other music that may no longer be readily available from traditional music retailers". The problem here is that these do not sound like the most desirable titles around. The market for "out-of-print" and "past hits" doesn't appear to be terribly large.

The company got 87% of its total revenue from Apple (NASD:AAPL) iTunes last year. There is nothing wrong with that in and of itself, but a level of concentration that high could be very dangerous, and the Apple contract has less than a year to go.

Under the circumstances, 73 times sales is pretty hard to justify.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Audible's Bright Future

Audible's (NASD:ADBL) stock price has been cut in half this year. The provider of audio entertainment, information, and educational programming on the Internet traded as high as $20.08 last summer and now changes hands at about $10.50. Given the company's market and prospects that price is simply too low.

Audible's revenues have roughly doubled each of the last two years, and revenues rose each quarter-over-previous-quarter in 2005. Total revenue for 2005 was $64.2 million. After a small operating profit of about $1 million in 2004, the company lost $3.5 million last year. The company has roughly $67 million in cash and short term investments.

Audible is a leader in the recording and audio playback of the spoken word over the Internet. The content can be listened to on PCs, CDs, and many portable audio players. The company has 80,000 hours of content from 270 publishers which include a number of major newspapers and book companies The Wall Street Journal, New York Times and Random House. And, the company has distribution deals with Apple (NASD:AAPL), Amazon.oom (NASD:AMZN) and others.

The trend is Audible's friend. With MP3 players and related products continuing to grow at a rapid pace, the need for high-end content is not going to go away. As one of the core suppliers of this content, Audible is in the catbird's seat.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Why Wall Street Doesn't Believe Dell

On the surface, finding fault with Dell (NASD:DELL) would appear to be very difficult. Revenue has gone from $44.1 billion in 2003 to $55.9 billion last year. Granted, operating income did not grow nearly as fast and was almost flat from 2004 to 2005, moving only from $4.254 billion to $4.347 billion.

Dell's CEO still talks about hitting the $100 billion mark in annual sales, but he is not giving any timetable. And, perhaps that is part of the problem. Investors wonder whether the company can still grow at any reasonable rate. The markets are clearly skeptical since the stock trades at about $29, which is where it was five years ago. After a run to over $41 in July 2005, the stock has pulled back again.


Dell is well-known as be a magician with logistics and cost controls, but does the company control its own fate? The critical components it buys for its hardware come from companies like Intel (NASD:INTC) and its software from companies like Microsoft (NASD:MSFT). This does not make Dell any better or worse off that Hewlett-Packard NYSE:HPQ) or any other manufacturer or marketer of PCs and servers, but it does say something about Dell's future ability to drive rapid revenue growth. The success of products like the new Microsoft OS may be just as critical to Dell's business as anything the company can do internally.

Dell expects to see robust sales in markets like China and India. But, the other side to coin is that the large Asian manufacturers like Lenovo plan to step up efforts to sell their products in North America. And, that is the crux of it. Can Dell grow fast enough in large new markets like India to offset whatever competition is has from Lenovo, Acer and other Asian companies, not to mention H-P? Certainly partnerships like the one Lenovo has set up with Best Buy (NYSE:BBY) for PC retail sales are not good news for Dell. China's second largest PC company, Founder Technology Group, could also begin to push harder outside it native market. Dell, which according to media accounts, is in third place for market share in China, is clearly squeezing these companies on their home turf. Now, they are pushing back.

And, there is always the chance that Steve Jobs and Apple (NASD:AAPL) can actually begin to pick up some share for the Mac now that Intel-based (NASD:INTC) Macs will run Windows XP.

According to Dell, its international sales reached 43% of total revenue last year. Reuters (www.reuters.com) has run stories citing Michael Dell, the company's founder, saying he expects growth in India of 40% during Q1 06.

In the end, the proclamations of $100 billion in sales and strong growth in emerging markets has not moved the Dell stock, nor are they likely to. At least until Dell can show that the horde of competitors chasing it are merely pretenders.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Ten Worst Managed Tech Companies: 10) Loudeye


When I was at Financial World Magazine, we would do a list of the ten worst managed companies in America. The cycle was about once a year. To make the list, a company had to do a lot wrong compared to the rest of the stock market and its peer group. The financial results would have to be very poor, and companies in industries that were down across the board were usually not included. For this tech list, a number of financial sources were consulted along with research from Wall Street and sources like ValueLine (www.valueline.com), Morningstar (www.morningstar.com), Investor's Business Daily (www.investors.com), and Yahoo!Finance (finance.yahoo.com).

Loudeye (NASD:LOUD) which supplies digital media solutions and outsourcing for companies looking to maximize their return on their digital media investments has been through multiple CEOs and business models over the last six years. In its latest incarnation, the company offers global digital media supply chain management for content owners across the music, film/video, game and software industries. Since their earlier business models didn't work, maybe this one has a chance. Loudeye hopes so, because their auditors have indicated that might be running low on money by giving them a "qualified opinion".

Wall Street is betting against a Loudeye turnaround. After trading above $2.50 in late 2004, the stock ran down to $.35 and now trades at $.51. The company's revenues have gone up over the last three years, but expenses have gone up more. Loudeye has shown an operating loss in each of these years with the largest one being a hole of $26.3 million in 2005.

Loudeye's revenue growth may be disappearing. The company guided for revenue in Q1 of $7.5 to $8 million, which would be below the Q4 or number of $8.8 million.

The chances that Loudeye makes it as an independent company seem fairly low now, so the question may be what it will fetch in a sale. The board and management were simply never able, after multiple attempts, to find a digital media model that would make money.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Ten Worst Managed Tech Companies: 9) Microvision

When I was at Financial World Magazine, we would do a list of the ten worst managed companies in America. The cycle was about once a year. To make the list, a company had to do a lot wrong compared to the rest of the stock market and its peer group. The financial results would have to be very poor, and companies in industries that were down across the board were usually not included. For this tech list, a number of financial sources were consulted along with research from Wall Street and sources like ValueLine (www.valueline.com), Morningstar (www.morningstar.com), Investor's Business Daily (www.investors.com), and Yahoo!Finance (finance.yahoo.com).

For those of us just off the farm, Microvision (NASD:MVIS) is a mighty hard company to understand. The company makes scanned-beam displays that produce very high resolution images. The company also makes scanned-beam imagers. Microvision says that its products in this area "offer greater range and depth of field, reduced motion blur, enhanced resolution, extended spectral response, reduced cost, reduced size, lower power consumption, and improved shock and vibration tolerance". Microvision makes the case that their technologies will replace older, less effective ones.

Maybe someone forgot to tell the customers. Microvision's revenue was $14.7 million in 2003 and $14.7 million in 2005. Not much progress. The company's operating loss for the three years from 2003 through 2005 was $94.8 million.

Microvision traded near $10 in mid-2004, and has a 52-week high of $6.77. It is below $3 now and is still probably no bargain.

To add insult to injury, the company's auditor has given the company a "going concern" opinion.

As they say, "if wishes were horses, all the beggars would ride".

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Ten Worst Managed Tech Companies: 8) Mercury Computer Systems

When I was at Financial World Magazine, we would do a list of the ten worst managed companies in America. The cycle was about once a year. To make the list, a company had to do a lot wrong compared to the rest of the stock market and its peer group. The financial results would have to be very poor, and companies in industries that were down across the board were usually not included. For this tech list, a number of financial sources were consulted along with research from Wall Street and sources like ValueLine (www.valueline.com), Morningstar (www.morningstar.com), Investor's Business Daily (www.investors.com), and Yahoo!Finance (finance.yahoo.com).

Mercury Computer (NASD:MRCY) is in a bunch of businesses, especially for a company that does $45 million in revenue a quarter. The company provides high-performance embedded processor and I/O boards. They have a custom system design and engineering service business. Mercury has an interconnect architecture for the network, embedded and storage markets. The company also says it develops software for signal and image processing, visualization, analyzing and reconstructing images.

The industries that Mercury targets are equally broad: the defense industry, aerospace, education and research, electronics manufacturing, energy, and life sciences. Maybe it is just too much for investors to absorb, but the results are not working out well.

Mercury is making a habit of guiding down. On April 4, the company revised down estimates for its fiscal Q3 (3/31/06). Revenue was slated for $55 to $58 million, and that was dropped to a range of $43 to $44 million. On January 26, the company cut guidance for the full year 2006. The same day, that company announced its fiscal Q2 revenue (12/21/05). On February 9, Mercury revised those results, saying "subsequent to the initial earnings announcement on January 26, 2006, the Company's investigation of a discrete field warranty obligation resulted in the Company increasing its product warranty accrual for the second quarter". You sort of wonder why they didn't catch that before.

The company did over $71.5 million in the 6/30/05 quarter. That dropped to $66.9 million in the 9/30/05 quarter and then to $62.5 million in the 12/31/05 period. As one would expect, operating income dried up going from almost $13.9 million in the 6/30 period to $231,000 for the 12/31 Q. Obviously, a drop to $44 million for the quarter that just ended would continue a fairly ugly trend. Some of this may be due to the fact that the company's defense group was 68% of revenue in 2004 and only 59% in 2005. Maybe investors wonder what that number will be in 2006.

Mercury has hardly rewarded investors. The stock traded nicely above $30 during February 2005. You can pick it up for less than $18 now. Let's hope it doesn't get any worse.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Ten Worst Managed Tech Companies: 7) Sun Microsystems

When I was at Financial World Magazine, we would do a list of the ten worst managed companies in America. The cycle was about once a year. To make the list, a company had to do a lot wrong compared to the rest of the stock market and its peer group. The financial results would have to be very poor, and companies in industries that were down across the board were usually not included. For this tech list, a number of financial sources were consulted along with research from Wall Street and sources like ValueLine (www.valueline.com), Morningstar (www.morningstar.com), Investor's Business Daily (www.investors.com), and Yahoo!Finance (finance.yahoo.com).


John Shoemaker, who worked at Sun (NASD:SUNW) for fifteen years and ran the company's server group, wrote a brutal assessment of Sun's multiple strategic mistakes over the years which ran in Business Horizons, the journal of the business school at Indiana University, according to a summary provided by CNET (www.cnet.com).
He recounts the lost opportunities to cut costs, the departure of president Ed Zander, the massive and futile investment in Java, and the purchase of StorageTek.

For those who have watched the company over the years, it all rings true. The company's stock, which traded close to $15 near the beginning of 2002 has rarely been above $5 in the last four years.

According to data from Morningstar, Sun's revenue peaked in 2001 at $18.25 billion dollars. Operating income hit is high mark in 2000 at $2.4 billion. Since 2002, the company has had negative operating income in every year. Revenue has been essentially flat since 2003. In the most recent quarter, ending 12/25/05, revenue rose to $3.337 billion, but the cause of the increase was acquisition related. Despite the revenue growth, the company had a net loss of $223 million.

To quote the Morningstar write-up on Sun's prospects: "The company's competitive position deteriorated considerably in the recent downturn; regaining lost market share will be tough." You can say that again.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Ten Worst Managed Tech Companies: 6)Savvis

When I was at Financial World Magazine, we would do a list of the ten worst managed companies in America. The cycle was about once a year. To make the list, a company had to do a lot wrong compared to the rest of the stock market and its peer group. The financial results would have to be very poor, and companies in industries that were down across the board were usually not included. For this tech list, a number of financial sources were consulted along with research from Wall Street and sources like ValueLine (www.valueline.com), Morningstar (www.morningstar.com), Investor's Business Daily (www.investors.com), and Yahoo!Finance (finance.yahoo.com).


Savvis (NASD:SVVS) was the IPO spin-off of the Night of the Living Dead, pseudo- Bloomberg-killer, the roll-up known as Bridge Information Systems that was masterminded by venture capital firm Welsh Carson. The Savvis offering had barely made it out the door when Bridge collapsed into Chapter 11 and its pieces were sold off for pennies on the dollar.

Savvis's luck has only been slightly better. In 2000, the stock traded for almost $25. After going relentlessly downhill to penny-land, the stock recovered to $4 in early 2004, and then rolled over and nose-dived again. It has recently rebounded slightly to $1.45 and now sports a market capitalization that is about 50% of sales.

Savvis has managed to have negative net income in 2003, 2004, and 2005. On top of that the company's founding CEO resigned after running up a large tab for a stripper in New York City. A very large tab of $241,000.

Savvis is in a promising end of the technology business and is often mentioned as a competitor to content deliver network company Akamai (NASD:AKAM). The difference is that Akamai has gotten its act together and its stock has gone from about $12 to $31 over the last year. Akamai has a market cap of $4.8 billion compared to Savvis's $263 million.

Someone forgot to get in line to buy a ticket before the bus left.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at douglasamcintyre@gmail.com.

Ten Worst Managed Tech Companies: 5) Take-Two Interactive

When I was at Financial World Magazine, we would do a list of the ten worst managed companies in America. The cycle was about once a year. To make the list, a company had to do a lot wrong compared to the rest of the stock market and its peer group. The financial results would have to be very poor, and companies in industries that were down across the board were usually not included. For this tech list, a number of financial sources were consulted along with research from Wall Street and sources like ValueLine (www.valueline.com), Morningstar (www.morningstar.com), Investor's Business Daily (www.investors.com), and Yahoo!Finance (finance.yahoo.com).

The train wreck that is Take-Two Interactive (TTWO), the big time video game company, is a screw-up of the first order. The Audit Committee Chairman resigns, the company dismisses its auditors, the company asks for an extension for its 10-K, the company is hit with multiple shareholder class action suits, the company has a loss in fiscal Q1 loss (1/31/06) compared to a profit a year ago. By the way, the departing director left a little present in the form of a letter critical of the way senior management communicated with the board.

And, this is only recently. The company got into all sorts of SEC trouble in 2002 and changed CEOs. Take-Two did some serious revenue restating. It looked like the new regime might make a difference, but by April 2004, the new CEO, Jeffrey Lapin,was gone.

All this from a company that has one of the great video game franchises, Grand Theft Auto. Moral issues about the content of the game aside.

So, after trading at nearly $30 in May 2005, the stock fell below $14 recently, and has recovered to about $19.

The company's last four quarters of revenue have been uneven at best and in three of them Take-Two had operating losses. Maybe that is why the company only trades at 1.4 times revenues according to Yahoo!Finance.

Who said "what can go wrong, will go wrong"?

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited site in the world, according to MediaMetrix. He has been chief executive of On2 Technologies, Inc. and FutureSource, LLC and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.