Course 410: Distressed Stocks
Conclusion: Putting It All Together
In this course
1 Introduction
2 What Went Wrong?
3 How Bad Is It?
4 Is the Stock Despised?
5 How Cheap Is It?
6 Conclusion: Putting It All Together

SGI's stock is beaten down, and its balance sheet will keep it out of bankruptcy--for a while, at least. Can it recover? That's impossible to answer. Still, we can draw some common-sense conclusions. The proprietary graphics-workstation market that SCI once dominated has been drying up in favor of powerful desktop PCs, but SCI is responding to this change by making its products less proprietary. It has been restructuring itself and rethinking its strategies--always a risky proposition, but SGI is trying to address the changing computer-graphics landscape. And remember what we can know with confidence: SGI is financially solid, and it has a lot of great technology and talented engineers under its wing. Its stock price already reflects much of the pessimism resulting from recent disappointing operating results. In analyzing distressed companies, avoiding the avoidable--a high stock price, a rickety balance sheet, and catatonic management--is the best we can do.

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