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ny this publication. T #123384745 USERNAME: t :s www.taipanonline.com Next page… 11 September 29, Sara Nunnally advised read-
ers to bank 13% on the remainder of
Patterson-UTI Energy (PTEN:NASDAQ) on
Friday, November 11. Although that might not sound like
much, it’s certainly better than a loss—
especially considering investors were bail-
ing out of the stock en masse following
news that a former officer may have embezzled US$70 million or more from the
company. Volume hit a massive 21,773,212 as the
stock sank US$2.83 (8.6%) to close the day
at US$30. The selloff wiped US$500 million
from PTEN’s market cap. Having seen the
news early that morning, Sara wasted no
time in getting an alert out to Taipan read-
ers, who should have been able to cash out
around US$30.35. It’s been a tough road for Faro
Technologies (FARO:NASDAQ) recently.
This recommendation was originally a
“pre-release” article to the May 2005
Taipan issue, with an entry price of
US$25.09 ahead of an important strategic
guidance and earnings conference call. The stock did initially take off on a very
upbeat report, scooting as high as
US$30.59, but has since got bogged down
in a patent infringement lawsuit with rival
company Romer CimCore and a weak
third quarter earnings report. Faro, which designs and builds laser-
based, precision-guided software applica-
tions for the manufacturing sector, is now
facing a January court date with Romer,
which alleges that Faro breaches its patent
on its use of FaroArms. For its part, Faro has responded by
saying the “flawed ruling mischaracterizes”
Faro, since the court has neither “reinstat-
ed” nor “reaffirmed” its prior ruling and
has, in fact, altered its ruling by “substan-
tially narrowing” the scope of the lawsuit.
Faro believes that this “will ultimately lead
to a finding that it does not infringe any
claim of the Romer CimCore patent. FARO
regrets that Romer CimCore has chosen to
make seemingly misleading statements in
the press that act to confuse rather than to
inform the public about the pending litiga-
tion.” Faro CEO Simon Raab states: “The
Romer press release is just a continuation
of belligerence and harassment by a large foreign corporation, which we continue to
believe is the underlying purpose of the
suit. There is no foreseeable event that will
ever stop us from producing our product
since we have numerous immediately
applicable production design alternatives.” In addition, third quarter sales hit
US$32.6 million. Yes, a US$9.2 million
increase (39%) over Q3 2004, but still
lower than the US$37.1 million estimate.
Earnings hit US$2.6 million (18 cents-per-
share), versus US$3.1 million (22 cents-
per-share) a year earlier and forecasts that
called for 25 cents-per-share. For the fourth quarter, Faro expects to
earn 19 to 27 cents-per-share, on sales of
US$33 million to US$35 million—lower
than forecasts of US$37.1 million in sales
(35 cents-per-share). And from an August
announcement maintaining its US$125
million to US$132 million in full-year sales
and US$1.15 EPS, Faro now expects sales
of US$124 to US$126 million (75-83 cents-
per-share). I’ve cut the company a good amount of
slack so far, and while I believe its long-
term growth potential remains solid, I can
no longer justify keeping it in the Core
Portfolio at this point. So I’m replacing it
with another one of my recent picks—
iVillage (IVIL:NASDAQ) from the October
2005 issue. By contrast, iVillage third quarter earn-
ings doubled to US$2.2 million (3 cents-
per-share) over US$1.1 million (2 cents- C O R E P O R T F O L I O Laser-maker Faro makes way for
the Village by Martin Denholm www.taipanonline.com