No. of Recommendations: 0
1. From the Fool On the Hill article, Feb 26, 2001:
http://www.fool.com/news/foth/2001/foth010226.htm

All the following companies are in hard-hit information technology fields.
Trading at less than one-tenth of their 52-week highs, but above the $5-per-share cutoff for penny stocks.
Trailing price-to-sales ratios in the neighborhood of 5x or less.
Only one or two are generating any positive cash flow at all for themselves at this point.

Name and Ticker PSR
Foundry Networks (Nasdaq: FDRY) 4.5x
Turnstone Systems (Nasdaq: TSTN) 2.2x
CacheFlow (Nasdaq: CFLO) 2.5x
Clarent (Nasdaq: CLRN) 2.8x
Netro (Nasdaq: NTRO) 5.2x
JNI Corp. (Nasdaq: JNIC) 3.5x
F5 Networks (Nasdaq: FFIV) 1.6x
Ditech Communications (Nasdaq: DITC) 1.6x
Marimba (Nasdaq: MRBA) 2.9x
Mercator Software (Nasdaq: MCTR) 1.6x
Vignette (Nasdaq: VIGN) 4.2x
Apropros Technology (Nasdaq: APRS) 2.7x
SilverStream Software (Nasdaq: SSSW) 3.2x
BroadVision (Nasdaq: BVSN) 5.0x


2. My quick and dirty analysis starts here:
Of the 14 companies above, 4 have positive GAAP earnings:

FDRY Foundry Networks
http://quote.fool.com/Snapshot/snapshot.asp?symbols=FDRY&currticker=FDRY
Foundry Networks designs, develops, manufactures and markets an end-to-end suite of high performance networking products, including Internet routers, Gigabit Ethernet Layer 2 and 3 switching routers and Internet traffic management systems. For the FY ended 12/31/00, revenue totaled $377.2M, up from $133.5M. Net income totaled $88.1M, up from $22.9M. Results reflect strong demand for the Company's routers and Ethernet switches.
3 year sales growth of 381% http://quote.fool.com/snapshot/financials.asp?symbols=FDRY
Earnings of $0.69 a share
Current Price 13 5/16
P/E = 19
Net cash provided by operating activities (9 months ending Sept 2000) $65M
Cap Ex (9 months ending Sept 2000) ($3M)
So positive free cash flow for 12 months = approx. (65-3)(12 months / 9 months) = 82M
117M shares outstanding
Cash $150M or $1.28 cash per share
No Debt
Enterprise Value = 13 5/16 –1.28 +0 = $12.00
Enterprise Value/Earnings = $12.00/0.69 = 17.3
Enterprise Value/Free Cash Flow = $12.00/($82M/117M shares) = 17 times free cash flow

TSTN Turnstone Systems, Inc.
http://quote.fool.com/snapshot/snapshot.asp?symbols=TSTN
Turnstone Systems, Inc. is a provider of products that enable local exchange carriers to rapidly deploy and efficiently maintain digital subscriber line (DSL) service, enabling the automation of installation, qualification and maintenance of copper lines. For the FY ended 12/31/00, revenues totaled $149.4M, up from $27.2M. Net income totaled $22.4M vs. a loss of $232K. Results reflect increased sales of the Copper CrossConnect CX100 product.
1 year sales growth 449% http://quote.fool.com/snapshot/financials.asp?symbols=TSTN
Earnings of $0.33
Current Price 6 11/32
P/E = 19
Net cash provided by operating activities (9 months ending Sept 2000) $30.7M
Cap Ex (9 months ending Sept 2000) (2.9 M)
So positive free cash flow for 12 months = approx. (30.7-2.9)(12 months / 9 months) = $37M
65M Shares outstanding
Cash and Short Term investments $285.2M or $4.38 per share!!!
Long Term Liabilities $2.4M
Long Term Liabilities $18M or $0.27 per share
Enterprise Value = 6 11/32 – 4.38 +0.27 = $2.23
Enterprise Value/Earnings = 2.23/0.33 = 6.76
Enterprise Value/Free Cash Flow = $2.23/($37M/65M shares) = 3.9 times cash flow

JNIC JNI Corp.
http://quote.fool.com/snapshot/snapshot.asp?symbols=JNIC
JNI Corporation is a designer and supplier of Fibre Channel hardware and software products that connect servers and data storage devices to form storage area networks. The Company's primary products are host bus adapters for use with the SBus and PCI interfaces. For the FY ended 12/31/00, revenues totaled $103.2M, up from $40.2M. Net income totaled $14.3M, up from $2.8M. Results reflect increased sales of the Company's Fibre Channel products.
5 year sales growth 325% http://quote.fool.com/snapshot/financials.asp?symbols=JNIC
Earnings of $0.52
Current Price 13 9/16
P/E 26
Net cash provided by operating activities (9 months ending Sept 2000) $7.3M
Cap Ex (9 months ending Sept 2000) (3.886M)
So positive free cash flow for 12 months = approx. (7.3 – 3.886)(12 months/9 months) = $4.54M
24M shares outstanding
Cash and Marketable Securities available for sale $49.8M or $2.07 per share
Long Term Liabilities $18M or $0.75 per share
Enterprise Value = 13 9/16 – 2.07 + 0.75 = $12.24
Enterprise Value/Earnings = 12.24/0.52 = 23.53
Enterprise Value/Free Cash Flow = $12.24/($4.54M/24M shares) = 64 times free cash flow.

DITC Ditech Communications
http://quote.fool.com/snapshot/snapshot.asp?symbols=DITC
Ditech Communications designs, develops and markets echo cancellation equipment and equipment that enables and facilitates communications over fiber optic networks. For the 9 months ended 1/31/01, revenues rose 45% to $102M. Net income applicable to Common fell 56% to $9.3M. Results reflect continued market acceptance of the Quad and Broadband echo products, offset by increased R&D expenses and the amortization charges for acquired intangibles.
5 year sales growth 71% http://quote.fool.com/snapshot/financials.asp?symbols=DITC
TTM earnings $0.59
Current Price $9.00
Net cash provided by operating activities (6 months ending Oct 2000) $20.5M
Cap Ex (6 months ending Oct 2000) ($2.2M)
So positive cash flow = approximately ($20.5M – $2.2M)(12 months/ 6 months) = $36.6M
29.4M shares outstanding
Cash and Equivalents $105M or $3.57 per share!!
No Debt
Enterprise Value = $9.00 - $3.57 + 0 =$5.43
Enterprise Value/Earnings =5.43/0.59 = 9.2
Enterprise Value/Free Cash Flow = $5.43/($36.6M/29.4M shares) = 4.36 times free cash flow.
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