S A ADVISORY August - September 2000
Brief New Buy Recommendation - Silicon Graphics
New Buy Recommendation - 3COM Corp. (COMS - Price $13)


S.A. Advisory
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Salt Lake City, Utah 84117

Brief New Buy Recommendation 
On July 13, 2000 we recommended SGI at $4.00 as a speculative BUY.
Silicon Graphics

The company is engaged in high-performance computing, powerful servers, super-computers and visual workstations.

Active website: http://www.sgi.com

Revenue for recent fiscal year up $2.3 billion, down from $2.7 billion, while losses of $4.52/sh vs. a gain of .28. Much of the losses were from restructuring, MIPS spin-off, tax related and inventory, right down! This stock is totally unloved by Wall Street. At present 12 brokerages follow SGI and rate it as a HOLD. The usual story - they have no "balls" to be different as to view SGI as a great value play and potentially a huge turn-around story. At present SGI has around $1.40 in cash, small debt load, strong book value, growing backlog, new management and most importantly, "new products".

If you subtract out the cash, you are paying around $2.60 for the rest of the enchilada!

The recent introduction of a new Unix server design, bringing on board Hal Covert, formerly with Red Hat and Adobe and now SGI's CFO, and the recent acquisition of Intel workstation designs from former competitor Intergraph, indicates that SGI is serious about retaining its leadership in high-performance technical and graphics computing.

Even though SGI lost .04 during the 4th quarter from operations, a turn-around appears at hand. Analysts tend to believe that June 01 and June 02 will yield .08 and .40, respectively, for estimated year-end results. It is highly possible that these numbers will turn out too conservative.

If you like technology and in reality can handle a small amount of downside risk, we believe the SGI could be a screamer.

We intend to monitor SGI in our NYSE Orphan Portfolio for percentage gain performance.

Broker contact, Greg Nelson at 1-801-256-2160.

New Buy Recommendation 
3COM Corp. (COMS - Price $13)

On July 13 via e-mail we recommended investors buy 3COM Corp. when issued (COMSV) @ $13.75. Since that time the "when issued" trades as COMS (recently spin-off PALM shares).

We at S.A. Advisory view this investment opportunity to be very intriguing. As of July 27, 2000, the spin-off was complete! What is left is a super-clean balance sheet with about $3 billion in cash or roughly $9 a share based upon 3COM's 350 million shares outstanding. (We don't have the exact number yet because of possible option conversions - ball park figure!). When you consider the amount of cash/sh, investors are paying little for 3COM's core operation. It's true that major chunks of 3COM's businesses are in decline, including network interface cards, but it does have some emerging businesses, like broadband and home-networking products that are showing strong growth.

Food for thought: At $20 (COMS), the company would be trading at around 1x estimated fiscal 2001 sales of $3.4 billion, before factoring in the cash on its balance sheet. No networking company has such a low valuation. Cabletron System, a weaker networking outfit, commands around 3x sales. It is believed that 3Com will initiate a $1 billion stock buy-back program soon after the completed PALM spin-off (July 27, 2000). This could boost its share price. Finally, a company with such a large pool of cash could take the tiger by the tail, that is, a slick acquisition could transform 3COM into a "new" and rapidly growing company that Wall Street would love. We see very little near term risk and exciting upside potential as 3COM reinvents itself.

We rate 3COM (COMS) at current levels with a strong buy recommendation. We intend to monitor COMS for percentage gain performance.

Broker contact: Greg Nelson at 1-801-256-2160.

Other Buys 

1. ADPT - just read to news. This stock has the makings of a huge winner. Trades near 52 low, low PE, technology leader - buy ($23.50).
2. WCOM - At $36 - looks juicy for patient investors. Controls 38% of the internet backbone - traversing the net means passing along their networks. This is how your should play the internet. We rate WCOM with a strong buy recommendation. Recently mentioned spinning off long distance or forming a tracking stock. May still be looking for acquisitions or could be for sale itself (not likely - just too big to buy!)
3. HMDL, FCIN, FRTI, SETO, IWMC (see June 28 e-mail), PETD (see May 10 e-mail - pure natural gas play).


1. June 28, 2000, e-mail message. On 8-29-99 recommended ADTX @ $.15 - recently announced a merger - stock currently .87 - on June 28, 2000 recommended to sell for a 483% GAIN.

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