Steve, some observations:
On the trading action. I just looked at a 5 year chart. Based on that alone, I would guess that this move would not get much past $5 and a retracement not dip much if any below $3 -- except that if there is a significant general market correction soon a pullback would have a lower target, perhaps 2 1/2.
On your earnings outlook, the company has more than once said publicly that they would either be cash flow neutral in Q4 or turn cash flow neutral -- not the same thing, and I forget exactly which they said.
Taking that at face value, it means that with flat sales, a significant portion of production from Yamaha, and ZERO depreciation charges (no undepreciated fab, equipment, or anything), they would about break even on earnings per share.
Admittedly, no depreciation charges is not the same as no fab at all,
but it does suggest to me that they have a ways to go on the current path to get back above zero on earnings. Also, I am not so sure it will be easy to model the earnings potential, because among other things impairing the fab is only one part of the picture.
I prefer to keep it simple if I can. Therefore, I like the idea of
a loss of 15 cents for Q2, and improving 5 cents per quarter thereafter, with an impairment depreciation relief bump of 5 cents (or whatever) starting in Q1 -- and then just asking on the CC if Bruce is comfortable with the RATE of improvement continuing for the next year or so. I do not care at this point how the interplay of company sales forecasts, fab impairment, people leaving, more production by Yamaha/ZMD/Sanyo, more high margin products, etc. plays out. Just let Bruce tell us whether the current rate of improvement is expected to improve, stay the same or slow down. That is the single key piece of info.
By the way, this simplistic model would give $-.15, $-.10, $-.05, $+.05, $+.10, $+.15, and $+.20, for the next 7 quarters, and your $.50 (untaxed) for 2000. I think a 20 P/E is what it would get, although it is probably not appropriate for a marginal company in a highly competitive cyclical industry requiring continuing, successful large R&D expenditures. |
