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Update Report
May 17, 2005
Input/Output Inc (NYSE) IO
52-week range $5.28 - $11.22
Market Cap $455.53M
Shares Outstanding 77.68M
Book Value $3.96
Price/Book 1.46
Average Daily Vol. 835K
Target Price $11.00
Target Percentage 90%
Input/Output Inc . is a major independent provider of seismic imaging technology and equipment for land, marine and seabed application for oil and gas exploration.

The stock of Input Output (IO) has been both a volatile and disappointing one since our initial recommendation at $8.73 per share.


The major reasons for this poor performance can be traced to:


•  Over the past two quarters, the company reported small losses due to the slower integration of the GTX Technologies acquisitions and the delayed closing of two contracts.

•  Due to the past hesitance of the major oil companies to significantly increase their exploration activities, the demand for seismic activity has improved less than anticipated.


During the past month there have been a number of signs that the environment for seismic activities is improving:


•  Input/Output is registering much stronger sales and profits in its GTX Technologies subsidiary.

•  The company anticipates receiving a large contract from China for its oil & gas exploration and development program.

•  Input/Output has recently experienced higher sales of its System Four System imaging product, which is a high profit service.

•  For 2005 we expect Input/Output to earn $0.40 per share, which compares with the $0.03 per share earned in 2004.


We consider Input/Output an extremely undervalued stock at its current price particularly in view of its strong finance and improving revenues.


In view of the current stock price, we are modestly lowering our target price to $11.00 per share from the previous $14.00 per share.



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