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Tickers in this Article: IVAC, EAGL

Towards the middle of this past week, Intevac Inc. (IVAC), saw a huge boost in its share price as it escalated from $22.18 to $28.88 (or a gain of 30%). The market reacted very favorably to Intevac's fourth quarter earnings. More specifically, it earned $0.97 per share, which not only surpasses earnings from the same period of last year ($0.46 per share), but also analyst estimates ($0.70 per share). The good news for shareholders continues as management indicates 2007 is looking even better than 2006, as a 20% increase in revenues is anticipated.

Intevac Inc. specializes in the design and creation of technology that is responsible for placing a special type of film into the magnetic disks found in computer hard drives. Chances are that the hard drive in your computer contains film that was deposited by the firm's product (the company holds a 60% market share in this area).

Interestingly, analysts are often surprised by just how well this company is doing. For example, for the last 5 quarters the company has beaten analyst estimates all 5 times and for 3 of those quarters analysts were off over 30%. In fact, analysts were off by over 200% for the company's 3rd quarter earnings (they had predicted that it would earn $0.13, whereas actual earnings were $0.41). With this amount of success, it shouldn't be too long before the market is compelled to up its expectation of the company's outlook.


EGL Inc. (EAGL) was one of the first big winners of this year. The freight and logistics firm had gained over 26% around a month ago due to buyout offer by a private equity firm. Unfortunately, EGL fell into a noise dive this week as its share price dropped from $38.17 to $32.19 (or a decline of 15.7%) resulting from an unfortunate turn of events relating to the buyout deal. EGL revealed that it has faced a 8% decline in revenue per shipment compared to last year in one of its key divisions. As a result of this news, General Atlantic LLC, which was the private equity firm that EGL CEO James Crane partnered up with for the buyout deal, has decided to withdraw its offer. This goes to show that while most private equity buyout deals go through without a hitch, some deals do fall through.

Remember that these private equity firms take chances in acquiring firms and then make changes at the managerial and/or organizational level in hopes of earning a healthy return on investment for their investors. Hearing that EGL was facing sizable declines in its year over year revenues was possibly a red flag that could not be ignored. Moreover, General Atlantic may possibly see that the declining revenue is a sign the EGL's industry may not necessarily be all that lucrative to pursue. The man behind the buyout, James Crane still plans to pursue a path in taking the company private and is currently searching for a suitable replacement for General Atlantic. However, this could be easier said than done as other private equity firms are likely to be scared off by this recent development.

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