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Technology Stocks : FLSH - M-FLASH SYSTEMS DISK PIONEERS

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To: burt l seifman who wrote (636)	7/27/1999 1:59:00 PM
From: Jerome Wittamer	Read Replies (2) of 923

Report on the CC: People present: Mark Schwartz :moderator Dov Moran Ronit Maor Chuck Schouw Content: -Nice backlog of orders going into 3rd Q -New design wins soon in IAD market (number of design win opportunities has more than doubled over the last year as companies are actively designing DOC into their products). -Marshall Industries' sales of DOC have doubled. It is a very significant partner. It was just purchased by Abnet (?), which is the 2nd largest conglomerate in the world (in that particular industry segment) so the potential is even bigger. -DOC were 62% of sales -120,000 DOC shipped =+300%growth YTY -DOC Millenium ramp up was slower than expected because Toshiba was to slow to respond to overwhelming demand (did not expect that) -Gross margin 33% - long-term focus 40% -Flash prices should not decrease in the 3Q -Private placement was to insure enough money for marketing and sales expansion -Millenium DOC did not yet ship (only very small quantities). THIS is the main driver of the next quarters. Q&A -GI & SFA contracts?: no disclosure. But they are 'talking' with different 'significant' manufacturers =could mean anything given that relatively speaking they are all huge compared to M-Systems. -Secondary offering in middle of 2000. -DOC 2000 to reach 880MB and 1.5GB end of 2000 -DOC Millennium to reach 32MB and 64MB, apparently very tough as no lead time forecast was given. -A list of 30+ OEMs are targeted: no deal done with them yet but designs are in progress: optimism prevails...Chuck was outbeat -Actively involved with MSFT on a 'number' of projects -WinCE: good leads at the WinCE conference -Capacity at Toshiba: bottleneck : should be OK as by October plant capacity should reach 250,000/month?this is kinda cool. -3Q to be seasonally slower than 4Q -Japan Marketing and Sales expenses should grow quickly as office is new, from what they have experienced recently, sales should grow fast. -Price of DOC to be shipped to WebTV does not create a precedent. Pricing is on a customer basis. The WebTV DOCs should be shipped in 3Q. -Intel not a serious competitor -Price of raw flash have risen significantly +33%in Q2. They handled that very well as they bought a lot in advance. The future should be alright as AMD and Intel compete more. Price should start to decrease. -Target is 15% net profit in 2002 All in all I think this is THE most optimistic CC I've heard from the company. My impression is that nothing happened yet. The best is to come. I do not think 1999 will be great in terms of revenues and earnings but it could well be the year of DEALS. MEGA DEALS. If you look at their current revenue growth rate the $100Mln threshold will be broken way before 2002 (but that's not taking into a/c seasonality). Hope you appreciate, Jerome

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