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Technology Stocks : Scientific Atlanta -SFA- going up ???
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To: napoopoo1 who wrote (840)7/10/2000 12:00:04 PM
From: Allegoria  Read Replies (1) of 1045
 
Gross margins should hit 30% in FY 01
From E-Trade:
We expect sales to rise about 32% in both FY 00 (Jun.) and
FY 01, spurred by accelerating shipments of digital boxes
and strong sales of transmission systems. Gross margins
should hit 30% in FY 01, up about half a point from FY 00,
as narrower margins for digital boxes in comparison to
those of analog boxes are offset by economies of scale. The
company shipped 512,000 digital set-top boxes in the third
quarter of FY 00, and the company plans on expanding its
capacity to manufacture over 1.3 million digital boxes per
quarter by January 2001. As of late May, SFA was
manufacturing about 720,000 boxes per quarter. We expect
operating margins to improve from 6% in FY 99 to about
12% in FY 01, aided by reduced operating expenses and the
sale of the unprofitable portion of the satellite business.
Our EPS forecast excludes one-time gains from the sale of
investments.

Valuation 30-MAY-00

We continue to recommend buying shares of SFA. The
company's fundamentals remain very strong due to an
accelerated push by North American cable operators to
deploy digital services. The set-top business is capacity
constrained at this point, but the company is planning to
add significant amounts of capacity in the near future.
Because demand for boxes has outstripped SFA's
immediate ability to produce them, orders for boxes were
almost double actual shipments in the third quarter. This
strong order inflow has given us more confidence in our
EPS estimates. We see additional opportunities for the
company to expand overseas as international cable
operators begin to upgrade their existing networks. Despite
an above average P/E multiple, we believe that the shares
are undervalued relative to SFA's growth opportunities and
its position as one of the few independent cable equipment
firms.
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