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No. of Recommendations: 1 come the short interest is so high? Am I missing something?

There is a class action lawsuit filed against ESS Technology...

Here is the gist of the suit:
Specifically, the complaint alleges that defendants failed to disclose the declining demand, downward price pressure, and increasing commodification of ESS's core product -- DVD processor chips --

I'm no legal expert, but, I can't see how this suit holds much validity. Declining demand, downward price pressure, and increasing commodification of microchips is nothing new to semiconductors. Those problems go along with semis like cookies go with milk. Any investors who don't expect it have no business investing in semiconductors anyway.

Just the mention of a lawsuit invokes fear in the heart of investors, but I surmise that the downturn from this lawsuit won't last more than a couple of months. However the other downward pressures may persist much longer. Most of all the overall downward trend of the stock market and technology stocks in peticualar. Plus the fear that DVD player sales will level off is a legitemate concern. As well the potential of Taiwan to flood the market with cheap chips.

That being said, Peter Lynch says that buying shares should be valued as buying the whole company. If you could theroetically buy ESST for $190 million or approx $4.40 a share then as the owner you could pocket the $180 million and own a brand new company for a mere $0.25 a share.

The fact that they have bought back shares in the past and are planning to buy back shares in the near future shows me that not only does management have faith in the company but also that they hold shareholder's value in high regard. I don't recall Global Crossing, Enron or World Com ever buying back shares. Every share the company buys back increases the percentage of the company that our shares represent.

Incidentally I bought back in at $12 a share. Too bad I didn't follow Warren Buffet's proverb that it's usually better to buy a stock too late than too early. But according to David and Tom Gardner's book: The Motley Fool Guide to Investing the cash a company holds is a virtual bottom for the stock price except in extenuating circumstances. I plan on increasing my ESST holding and would recommend buying to my friends and relatives as long as they resolve to be patient as no one can predict when the pendulum will swing back toward fair value and beyond.

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