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E-Mailbag Monday: ON Semiconductor, Quest Software, Dropping CFOs

Tom's readers e-mailed him with questions about ON Semiconductor, Quest Software and dropping CFOs.

What looks hot in the IPO market?

Reply: Take a look at ON Semiconductor. Previously known as the Semiconductor Components Group, the company is a division of Motorola. Basically, the company develops semiconductor components for wireless, networking, consumer electronics, cable, DVD, and high-speed modems. According to the World Semiconductor Trade Statistics, ON's addressable market was $19.5 billion in 1999 and is projected to grow to $25.1 billion in 2002.

ON believes strongly in R&D. In all, the company has 300 people in the department. This emphasis on innovation has resulted in over 16,000 products.

The lead underwriter is Morgan Stanley and the proposed ticker symbol is ONNN. The price range is $16-$18.

The Quest for Shareholder Value

You've written positively about Quest Software before. Still like them?

Reply: The NASDAQ spill has made Quest Software (QSFT) much cheaper. Yet, the company is still a strong player. Look at the recent fall-off in price as an opportunity.

Last week, the company continued its well-though-out M&A strategy. Quest Software purchased Client/Server Solutions. The company is a developer of the Benchmark Factory. The software tests mega IT systems against huge amounts of stress (such as lots of traffic). In other words, it makes systems more scalable and less prone to costly down-times. Customers include Compaq, Microsoft, Oracle and Shell Oil.

So You Want to Be a CFO?

What do you think of the recent resignations of CFOs at Net companies?

Reply: With the recent bloodbath in NASDAQ, as well as the intense competition in the Net space, it would not be surprising to see more CFOs resign. Some of the recent ones include E-Stamp and Official Payments. In the case of Official Payments (OPAY), the stock price collapsed, falling $11 1/2 to $5 1/4.

In most cases, the reasons given for the resignation are vague, such as "personal reasons" or "to pursue other opportunities."

However, I would say that the real reasons are typically not good. They usually fall into these categories:

1) The CFO is lousy. This is usually the result of a complete meltdown of accounting or spending that has run amok.

2) The company is in serious trouble and the CEO wants the CFO to finagle the financials. The CFO quits because he or she does not want to get sued or go to jail.

3) The numbers are terrible and the CEO needs to blame someone. Why not the CFO? Someone needs to be the fall guy.

Actually, I would bet that reason No. 3 is the most common.