Needham & Co.'s comments
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09:17am EST 15-Jan-98 Needham & Co. (Sandy Harrison 212 371 8300) ALSC
ALSC REPORTED SIGNIFICANTLY LOWER THAN EXPECTED REV OF $24.8MM; MAINTAIN HOLD.
Needham & Company, Inc. Sandy Harrison
January 15, 1998 (212)371-8300
harrison@needhamco.com
Summary
While gross margins for the December quarter, excluding inventory reserve,
were below our estimate of 18%, they did show sequential growth to 17.1% from
11.8% in the September quarter. Going forward, we expect gross margins to
continue to improve sequentially as the overall Company ASP and product mix
improves.
Alliance delivered an operating EPS of ($0.06) cents per share, versus our
operating EPS estimate of ($0.02), on significantly lower than expected
revenues of $24.8 million for FQ398 (December). The operating EPS loss
excluded a pre-tax charge of $5.8 million taken to write down existing DRAM
inventory to reflect the lower current market value. Also excluded from the
results were after tax contributions of $3.8 million or approximately $0.10 in
EPS from the Company's 19% equity share in its joint venture fab, United
Semiconductor Corporation (USC). With the USC contribution, EPS would have
been $0.04. Going forward, we expect the Company's revenues to increase
sequentially as its graphic products, which have higher ASPs, contribute a
greater percentage to revenues.
Going forward, the Company has an aggressive plan to expand its product mix to
include more revenues from its newer, higher ASP graphics products. Revenue
breakout by product was as follows: SRAMs 36% (vs. 31% in the September 1997
quarter), DRAMs 50% (62%), graphics 14% (6%) and Flash less than 1%. By
shifting the mix toward more value-added graphics products versus commodity
DRAMs, we believe revenues and gross profit should benefit materially. Revenue
contribution from the Company's new products continued to increase,
representing 80% of revenues, versus 60% during the September quarter.
Revenues from new products are expected to continue to show sequential growth
going forward as graphics, SRAM, and Flash products play a larger role.
Approximately 70% of revenues came from sales to the PC market versus 25% from
the non-PC market, which improved from the 75/25 split experienced in the
September quarter. The geographic revenue breakout was as follows: Domestic
55% (versus 63% in the June quarter), Taiwan 18% (17%), Europe 17% (8%), and
Other 10% (12%).
While gross margins for the December quarter, excluding the inventory reserve,
were below our estimate of 18%, they did show sequential growth to 17.1% from
11.8%. Going forward, we expect gross margins to continue to improve as the
Company transitions its product mix to incorporate newer products with higher
margins.
Visibility is expected to remain limited in the near term, with turns business
in the December quarter estimated to have represented between 50-60% of
revenues and turns business is expected to continue to represent a large
percentage of revenues. However, The Company's book to bill was at or
slightly above unity for the December quarter, improving backlog and giving
the indication visibility could potentially improve in the March quarter. |
