Singing Machine May Join a Larger Chorus

The shorts are all over Singing Machine (SMD ), although the karaoke king is still belting out robust sales and earnings. The stock has dropped to 10.90, down from its 52-week high of 19.14 in March. When featured in this column on June 29, 2002, the stock was at 9--rising to 13 in September. But the short-sellers, having shorted 600,000 of the 4.5 million shares in public hands, may get the short end of the stick.

Some bulls are sure management will sell off Singing Machine--either a hefty chunk or all of it--to a big entertainment outfit. Asked which possibility he prefers, Chairman Ed Steele said: "I'll take whichever comes first." He has hired investment banker A.G. Edwards to handle things. "Demand is exploding," says President John Klecha. "Best Buy, Circuit City, and Toys `R' Us are selling our karaokes as fast as they get them in. More shipments are coming from our Hong Kong manufacturers, but we need capital to increase production." He sees sales of $110 million to $120 million for fiscal 2003 ending Mar. 30, vs. last year's $62 million, and earnings of $1.60 to $1.70 a share, vs. 2002's $1.02.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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