The prophet, I would have used a higher number for next year as well, my problem in doing so is that SNDK is just breaking (on an operational basis) into profitability, more than 90% of the last quarter's bottom line were the royalties, not operational income. Since SNDK was "capacity" constrained rather than market constrained, I would assume that gross profits are not going to grow markedly and thus any additional sales will have better margins than last quarter due to coverage of overhead at the current level of sales but not due to improved gross production margins. Furthermore, I think that additional capacity they are negotiating would probably be "start up" capacity, namely the margins would be relatively thin there as well. Once they transit from the .28 to the .24 process, gross margin should improve (assuming no major ASP decline).
Last, don't feel guilty about my being interested in SNDK, so far it has been quite profitable for me, so, thank you very much. Currently, I am not long SNDK, I am waiting for the technical picture to improve.
Zeev |
