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Technology Stocks : California Micro Devices

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To: Tom Terf who wrote (125)	9/12/1999 1:17:00 PM
From: Alan A. Hicks	Read Replies (2) of 168

Studies by the Electronics Industry Alliance (EAI) show the market for Cal Micro's thin-film Integrated passives devices (IPDs) is set to explode. From 41% growth this year, the EAI expects the market for IPDs to grow 113% next year and 80% in 2001. There are good reasons for this to happen. Passive components already outnumber ICs by 15:1 on PCs and by 21:1 in cell phones. Passives make up 80 percent of total part count and continues to grow. In 486 motherboards there were around 150 passive components. On today's Pentium III motherboards there are about 1500 passive components. The same trend is happening in cell phones. Digital cell phones are expected to double the number of passive components to 1200 per phone over the next two years - and in smaller and smaller spaces. CalMicro has brought semiconductor technology to integrating passives on a single chip. They are well ahead of the rest of the industry with a 35% market share in thin film silicon IPDs. The rest of the passives industry continues to make thick film discrete components. Thick film essentially squeegees a thick film onto a ceramic base that is then cut up into tiny individual components. There are about 750 billion of them manufactured per year. It is a technology that has been around about 30 years. CalMicro continues to sell at a valuation just over one times revenues. I believe CalMicro should eventually be valued more as a analog or linear IC company such as Linear Technology, Maxim or Burr Brown. Maxim and Linear sell at 10 times revenues and Burr Brown at 6 times revenues. RF Micro Devices which has hit it big in cell phones sells at 20 times revenues. Another way to look at it would be CalMicro's IPDs are about 30% of their revenues but should finish their year at about 50% of revenues growing at over a 100% annual growth rate. That would support a valuation of 10 times IPD revenues of about $15 million this year and $30 million next year. (and a 0 valuation for the rest of the business). That suggests a valuation of $15 by next spring and $30 per share 18 months out. If CalMicro can show the growth, it can happen. CalMicro has had very strong design wins in PC motherboards related to Intel's Camino 820 chipset. Intel is supposed to start shipping this chipset by early October. Revenues should follow in the quarters ahead. Camino shipping will be a key event for CalMicro.

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