Why The Slide In High Tech Hasn't Touched Scitex

With technology stocks on the ropes, Scitex should be reeling by now. But the maker of computer-aided-design systems for automated image reproduction hasn't slumped. In fact, Scitex has continued to rise even though Chairman Robert Maxwell (of publishing fame) and a group of Israeli investors have reduced their combined stake from 51% to 47%.

What's shoring up Scitex? For one thing, several pros are grabbing shares sold by Scitex insiders. "Scitex remains a home-run stock," insists money manager Paul Wick of J. & W. Seligman. He thinks Scitex, now at $30 a share, is worth $50.

Moreover, orders for its hardware and software from both the U. S. and Europe continue to increase despite the recession. Scitex, whose turnkey computer-imaging systems are used mainly in publishing and graphic arts, has "outscored its competitors in revenue growth and order backlog," says Wick.

Analyst Alex Henderson of Prudential Securities sees a "solid potential for upside earnings surprises." In recent years, Scitex has exceeded analysts' earnings and sales expectations. And Henderson says it's likely that earnings will again exceed his estimates: 63~ for this year's second quarter, $2.60 for all of 1991, and $2.90 for 1992. Last year, Scitex earned $2.10.

RICHER PALETTE. One source of expected growth: Scitex' new midrange products, which make color printing more affordable for small companies. This fast-growing market, which added sales of $20 million to last year's revenues, is expected to contribute $100 million in three years. Scitex already controls 50% of the high-end market, where rivals include Crosfield, owned jointly by Du Pont and Fuji Photo.

Don't worry about the insider selling, says Henderson. Maxwell, chairman of Britain's Mirror Group, assumed the chairman's post at Scitex in January, 1989, when he invested $39 million for a 27% stake. He isn't selling because of any disappointment over the company's performance. Rather, he needs cash to meet financial obligations, in part because of his recent purchase of the financially strapped New York Daily News.

The Israeli group includes PEC Israel Economic, Cial Electronic Industries, and Discount Investment. Henderson says the group's usual strategy is to invest in small, emerging growth companies. But with revenues projected to hit nearly $400 million this year and earnings increasing robustly since 1987, Scitex is growing, all right, but `small' and `emerging' no longer apply.

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