I have my great grandmother’s clock from Vienna. It doesn’t work, but I remember the chi...
Video on the Move
10/20/2006 12:00 am EST
His legion of investment fans can attest to
Michael Murphy's technical prowess. Always on the cutting-edge, he
manages to find companies for his subscribers that have not yet come under Wall
Street’s avaricious eye, resulting in many profitable opportunities…
"It's all about video, reaffirmed by: The Google acquisition of YouTube; Microsoft's announcement that its IPTV (Internet Protocol Television) software platform for set-top boxes will be supported in the next-generation, system-on-a-chip boxes; and Steve Jobs' recent preannouncement of Apple's iTV media center for your living room, coming in the spring.
"Harmonic (HLIT NASDAQ) is not in the set-top box business, but anything
that drives IPTV or more video over the Internet is good for HLIT. Harmonic
sells the video infrastructure systems that go at the head end of the process,
in TV studios and cable company distribution points. I'm raising the HLIT buy
limit to $7 for an unchanged $12 target, as it seems unlikely to dip below $6
even in a significant market correction. HLIT remains a Top Buy.
"Zhone (ZHNE NASDAQ) is another big beneficiary of video over the Internet, selling gear to telephone and cable companies for high-speed broadband connections at the customers' premises. After the negative preannouncement that I covered in the September 28 issue, the stock raised concerns as it dipped below $1 a share intraday, although it hasn't closed below that level.
"Obviously, missing this quarter was not good for Zhone, adding to the uncertainty that has depressed the stock's price for two years. I think insiders decided not to let it close below $1.00 a share, as that is the level that brings about NASDAQ procedures that are better avoided. But we really won't know more until Zhone reports after the close on October 19. The company has cash, blue-ribbon venture capital support, a rapidly-growing market, and industry-leading products. With a market capitalization just over $150 million, compared to over $1 billion in paid-in capital, I still think Zhone looks like a gift of major proportions.
"This should be as bad as it ever gets, as the September quarter is the hardest one to close international business. I'm buying ZHNE based on price, not timing, but am reducing my buy limit to $2 to reflect this latest disappointment. I'll cut the target price to $5 for next year, although there's no reason it can't hit the $7 figure if it executes better in a more favorable stock market environment."
"You could put in an order to buy ZHNE at $1.01, and maybe get some more on a down market day. I'm putting Zhone back on the Top Buy list."
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