Sunday, September 04, 2005

Initiating Coverage on Symbol Technologies

Symbol Technologies (SBL) suffered greatly when its management team fled the country after execs were villified for eroding shareholder value.

Then on August 1st, the guy they brought in from Cisco said he was leaving, too.

So off he went to NCR to fill the void left by Mark Hurd, who left when he landed the top job at Hewlett Packard (Hold Rating).

About Symbol: Weak captains don't necessarily mean the boat is weak.

Symbol is a good company -- they're still profitable -- serving an interesting sector.

Symbol Tech implements something called RFID technology, or bar code data capture.

SBL presents an attractive "RFID play" opportunity.

Walmart is already using RFID to maximize their CRM and supply chain systems; as other retailers and governmental entities allocate more of their budgets to RFID, we believe Symbol will benefit.

As Jim Cramer has pointed out on more than one occassion, SBL hasn't hit its earnings estimates once this year, so keep in mind that you're not buying a blue chip.

SBL, in addition, is already trading at 60 X 2005 earnings.

But we're offsetting that risk with their virtually debt-free balance sheet.

SBL is clearly a company in crisis, but if Wall Street is overdiscounting the restructuring risks, there's plenty of upside to consider here.

The technology is there; the missing piece in Symbol's corporate puzzle is execution.

Product-planning missteps, executive exits, lawsuits and accounting delays -- it's a lot to worry about.

But it's all we're worried about.

This is a company whose products are "becoming ubiquitous," as one analyst put it.

Cash flow is robust and insiders are showing us with their wallets that they like what they see.

We have a $15 price target inside the next 3-6 months for SBL shares.

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