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  • sirmick69 sirmick69 Jan 18, 2004 10:54 AM Flag

    The key question - read

    The one and only question that all of us here, longs and shorts, must ask ourselves is : given what we know about the Nortel deal and how we expect it to change both top and bottom lines for Avici, is this material change in the affairs of Avici worth an increase of $136 million (139.3%) in the market cap of this company?? How do I get the figure $136M? Simple. The stock has moved from $8 to $19.15 since the announcement was made. Multiply the increase of $11.15 by 12.18 million shares o/s and you get that 136M (rounded).
    I, for one, believe, based on what I think the deal will bring for Avici and comparisons with other similar deals made between tech companies in the past and their financial results for both parties, that the increase in market value of $136M (from $97.44M to $233.44) is not only unrealistic but even ridiculous! Here's what Avici had to say about itself in November of last year:

    "We provide high-speed data networking equipment that enables telecommunications companies and Internet service providers, referred to as carriers, to transmit high volumes of information across their networks.
    Since our inception, we have incurred significant losses. As of September 30, 2003, we had an accumulated deficit of $361.7 million. Our operating activities from inception through 1999 were primarily devoted to research and development, including the design and development of our proprietary application specific integrated circuits, or ASICs, and software, and system testing the Avici Terabit Switch Router (TSR). Revenue was first recognized during the first quarter of 2000. Since then we have also built our administrative, marketing, sales, customer support and manufacturing organizations and developed strategic relationships with systems integrators, distributors, customers and complementary vendors. We have not achieved profitability on a quarterly or an annual basis and anticipate that we will continue to incur significant operating losses in the foreseeable future. We have a lengthy sales cycle for our products and, accordingly, we expect to incur significant selling and other expenses before we realize the related revenue. During 2001 and 2002 we took actions to realign our cost structure in reaction to industry conditions. We expect to incur increasing sales and marketing, research and development and general and administrative expenses as our business expands. As a result, we will need to generate significant revenues to achieve and maintain profitability."

    The deal with Nortel is the only material change that took place since November 2003. Is it worth a 2.5 fold increase in market cap?? No way. All the analysts who cover Avici will agree on this. Not one of them has changed a thing as far as ratings and price targets are concerned since the announcement was made.
    Technically, if you like to short and make money on the way down, the one year chart of Avici with the unbelievable spike of the last few days can really make your juices run. A major pullback here is coming! The momentum push up, orchestrated by greedy MM's and foolish followers, is coming to an end.

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    • "only material change"

      Sorry you've lost so much money shorting. Your going to continue to lose if you believe it's still only a "material change"

    • No, the key questions are: what kind of recovery we will have? How good is AVCI's techonology? If the deal with NT is any kind of indication, how many other deals AVCI will have with other companies? Is it possible that the current estimate by all the idoitic analysts will be wrong, like they have been wrong in the JNPR case, like they upgrade JNPR ONLY AFTER the stock gapped up 7 points?

      Only a narrow minded person like you will focus on one question, will actually calculate how much the NT deal actually is worth.

      I understand you shorts want to make a quick kill on a stock that has run up so much in a few days. What bugs me is that none of you has provided the board any good reason. Well you might make a profit next week, but it's just your dumb luck, it has nothing to do with your reasoning.

      • 1 Reply to ymkui
      • Ymkui;
        You claim to be a wise and seasoned investor. Right?? It's pretty simple here. If you bought this stock a while back in the single digits, take your profits now. If you bought during the last couple of days, running with the herd on momentum, sell now if you have some profits. If you are as smart as you make us all believe, take profits when you're lucky after you invested in a speculative little company with huge losses operating in a niche of its own against giants. If you are lucky, take your profits now!! The one item of news and the euphoric momentum of the Nasdaq worked for you. Do NOT stretch your luck, smartass! Don't keep dreaming. You may turn into a loser before you know it. Take your profits and run. Look elsewhere.