Replies to post #10416 on Value Microcaps Motherboard

[hweb2]

tmcal, re SWTX

Did you listen to the last CC? I don't see how Q1 earnings could come in at .07/share or higher.

In Q4, there was a reversal of a $400K charge that boosted gross margins and a reversal of a $200K charge that reduced operating expenses. So Q4 earnings were actually more like .08/share instead of .10/share.

Guided for $15M in Q1 revenue and gross margins in the low 30% range. This is a sharp decline from Q4 gross margins. Operating expenses should increase due to the hiring of engineers and an additional $150K-$250K quarterly expense for Sarbanes-Oxley compliance. So Q1 earnings could be as low at .02/share IMO.

For 2005, guided for 10% revenue growth and 10% net margins...which should translate into earnings of about .20/share. Considering the sector, I think achieving those goals would be quite an accomplishment.

They've got an easy comp and insiders bought recently. But the way the stock has moved up the last couple weeks in the wake of a weak micro market, I'd be taking profits before earnings. Even if they hit their targets, doesn't seem like much upside left. With 10% revenue growth, a P/E of 10 seems more than fair...and that would put the stock at $2.

[thealicemay]

TMCAL6: SWTX

I picked up two blocks of SWTX last week and this week. The first at $1.43, the second at $1.50. I bought soley on the expectation that earnings will be a pleasant surprise. I’m a little queasy when a stock rises just before earnings like SWTX has done.

In that same light, I’ve been accumulating IIIN as well. They are announcing on Monday as well. Unlike SWTX, each time I bought the price dropped. Today’s action was positive. I believe they will have a good comp compared to last year. I’m not sure how the sequential numbers will play. I also don’t have any confidence on how management will “gussy-up” the outlook.

I’m hoping for a “pop” on both and selling-off a portion (at least half). Then I’m looking a DYN (not a value microcap) and AHOM as potential earnings plays.

In the interest of full disclosure, so far 2005 hasn’t been good to me.

TAM