SST Reports Strong Results
I have been in the Andaman Sea for a few months so I am way behind...but here is a write up that makes me smile:
SST Reports Strong Results
individualinvestor.com
Senior Analyst: Eric Singer (4/27/00)
Silicon Storage Technology (NASDAQ:SSTI - Quotes, News, Boards) reported blowout
first quarter financial results after the market closed on April 25th. Net revenue for the
quarter increased $14 million sequentially to $62.3 million, and was up dramatically from
the $18.3 million in revenue reported in the same period last year. The company saw the
highest gross unit shipments in its history, as unit shipments grew by 34% sequentially
and by 207% from the first quarter of 1999.
Strong top line revenue growth led to net income of $9.6 million, or $0.34 per share, well
ahead of our estimates of $0.26 per share. SST saw net income increase by $3.9 million
sequentially. While we had indicated in prior updates that we expected SST to exceed
our estimates, the magnitude by which SST blew away numbers is surprising and is
indicative of the tremendous momentum that the company is experiencing.
Gross profit margin for the quarter increased to 42% and SST reported an operating
income margin of 17% up from an 11% operating income margin in the fourth quarter.
Growth at SST continues to be driven by new product introductions that have allowed the
company to address a broad range of applications in the digital consumer, networking,
wireless communications and Internet computing markets. According to SST
management, strong growth was seen in applications such as digital TVs, DVD players,
MP3 players and network switches and routers. During the first quarter, SST announced
eleven new products and expects to introduce more than thirty new products over the
course of this year.
SST management indicated that market demand for its products is so strong that nearly
every density of product is on allocation. SST has remarkable visibility and is clearly
capacity constrained. Management indicated that they expect the industry shortage
situation to get worse before it gets better. To this end, the key challenge of SST is to
access additional manufacturing capacity to take advantage of the strong industry
growth.
SST recently announced a technology licensing and foundry agreement with National
Semiconductor (NYSE: NSM - Quotes, News, Boards) and is in talks with other
potential manufacturing partners in order to significantly increase manufacturing capacity
to meet demand. SST is flush with nearly $200 million in cash following its recently
completed secondary offering. As a consequence, the company has the financial
flexibility to consider a number of alternatives to accessing additional foundry capacity.
Despite the dramatic increase in SST shares since our initial recommendation, further
upside remains. Clearly, SST has tremendous momentum at its back. The company has
ramped production dramatically, increased its product offering and is enjoying
unprecedented demand for its products. We expect SST to access additional foundry
capacity over the coming months to meet the incredible demand for its products. With
capacity constraints likely to get worse before better, pricing will be firm and SST will
continue to mint money. Our estimates are currently under review for meaningfully
upward revisions.
Shares remain rated BUY.
Recommended on 12/11/99 at $37.50
Updated on 04/27/00 with SSTI at $80.62 |
