ANNEX B. MiniScribe Corporation Key Financial Ratios and Indicators
A few years after the venture-capital firm of Hambrecht & Quist took over the management of the ailing MiniScribe, the company turned around its profits and became a sizeable player in the disk drive industry. It became the dominant supplier of 3 ÃÂ½ inch disk drives, which was expected to replace the nearly obsolete 5 ÃÂ¼ inch drives. Demand forecasts in the near term for the former far exceeded the latter. In an industry in which technology and trends are king, MiniScribe's immediate future was indeed promising.
Unfortunately, however, rumors circulated in the investment community that MiniScribe was starting to encounter liquidity problems. This prompted us to take a closer look at the disk drive industry in general, and MiniScribe's operations in particular. In the process, we will reassess MiniScribe's existing "BUY" rating if this still holds.
Issue at Hand
Since this stock was on our "BUY" list, our clients might have this on their portfolio. We are well aware that rumors may have some factual basis, and hence should not be disregarded. On the ground of prudence, we must conduct a thorough reassessment of the company in order to protect our clients' best interest.
In this light, I aim to answer this critical question:
Do the rumors of MiniScribe having liquidity and inventory problems have basis?
After such reassessment, I intend to come up with a rating recommendation of whether to retain "BUY," or downgrade to "HOLD" or "SELL," as supported by an in-depth analysis of available quantitative and qualitative information.
I relied primarily on the following sources of information: company-issued financial statements, industry data from publicly-available sources, and the industry report of the research firm Dataquest. Quantitative analysis involved horizontal and vertical analyses of...