MFLX

MFLX was down by 18% yesterday, on no meaningful news. It has fallen from $65 in March this year to current $26 level. It appears that the immediate catalyst was a weak earning report from MFS, an Singapore based company that is a friendly take-over target of MFLX. However, the purchase of MFS will have minimum impact to MFLX's earnings, and therefore, a 18% fall appears excessive, particularly on top of 100% fall from March already. The fact is investors are very nervous with this stock, given it depends on Motorola (85% of revenue), whose new phone (Q) has not sold as well as expected. Investors appears to be discounting a miss for the quarter, and lower guidance for the year. Morgan Stanley issued a note late yesterday:

• "We remain confident in our C2Q06 estimates for M-Flex earnings of $0.52 on sales of $132 million. We do not believe the company is experiencing the same weakness as MFS since the companies have minimal model overlap, Motorola's overall handset business appears to have had a solid C2Q06, and M-Flex set a manageable bar with its original C2Q06 guidance. The intrinsic value of MFS has declined since M-Flex announced the acquisition and we believe M-Flex management may consider renegotiation deal terms, although the valuation depends more on how M-Flex can utilize MFS's assets than on MFS's current business."

If the company is able to deliver its earnings this quarter, the stock appears to be extremely cheap.