<<Mr. Sam, do have any analysis of SFAM's latest results and prospects for the future?>>
Well, needless to say, this quarter was a real stinker. The conference call was the worst I've heard since I started following SFAM in late 1997. A book:bill of 0.8 in the face of an industry upturn is horrible. My suggestion for what happened is that when the customers were doing technology evaluations during the last year and a half, SFAM was too distracted by the merger to respond effectively to AMAT's aggressive marketing tactics. Now, they're missing out on some of the follow-on orders. I suspect that next quarter will be another stinker.
After that, though, I am more optimistic. When new fab construction begins in earnest, SFAM will get a piece of it. They need to bring costs down dramatically in the meantime, so that the increase in orders falls to the bottom line. They have too many employees. The pre-merger IPEC staffing was way too high, and the staffing of the post-merger SpeedFam-IPEC has not been brought into line with their likely future revenues.
There is, of course, still the likelihood that SFAM will be a takeover target in the next year or so. Those chances are greater now that their stock price is lagging most of the potential acquirers. On a relative basis, a stock deal is more attractive for them now than it was before. I haven't looked at the balance sheet for the most-recent quarter, but at last check, they had $5-6 per share in cash with only a small amount of debt that was acquired from IPEC. The enterprise value, the price an acquirer would have to pay, is quite small relative to the potential value of the franchise in a year or so during the next fab construction boom, IMO.
With my money, I sold about a third of my stake at $11 after earnings came out to book the loss. I still have 3.3% of my money in this dog and plan to wait it out.
Profitable investing,
Mr. Sam |
