DZS Inc (DZSI)

[soesbandit]

Two key points from the preliminary news release on July 1 caused the sell-off.

First, their may be write-down on some of there assets. This would adversly effect balance sheet ratio's and means that some of the technology they have aquired is no longer worth what they paid or valued it at.

Secondly, and probably more troubling, is the fact that they lost potential business from their largest LAC customer becuase their cheapest possible pricing was still to expensive for their customer. Not a good thing when you are supposed to be a lower cost alternative. It signals that times are tough right now, not just domestically but globally as well. It could also signal that there is global competion that is undercutting them.

The guys that run this company are pretty sharp. They built Ascend Communication which was a huge success and a NASDAQ darling. It was eventually bought out. I think this will be viable company but you may be waiting a year or so before their niche in the market turns around. It is also an exceptionally rough time for microcaps which did not make there 1Q run as they normally do but have contiunued to trend lower as a group.

If I were adding at this point I think I would wait for the formal earnings release (July 22) and then acquire a little at a time to cost average. That way if it does trend lower before it trends higher you have a better average cost.

Just my opinion of course.

soes