I didn't listen to the conference call and haven't keep up with SpeedFam as much recently as I used to since I sold a bit part of my long-term position in May ($13.5). I do still hold 500 shares from 1996, but I've been neglecting it, I guess.
My reaction to their current predicament is the following:
1. They obviously have some competitive issues. AMAT has proven to be a tougher competitor than they have have ever had to deal with, and SFAM's rate of innovation in the wake of their merger was not sufficient to respond to that threat. Whether this is a long-term problem or only a short-term problem depends almost exclusively on how well they can continue to improve their product. I haven't looked at their latest tool in any detail and I'm not sure what "time-consuming modifications" were required, so I can't comment with any more authority than you regarding how likely they are to dig out of this. Regarding the debate about Lam's installed base, AMD had a press release regarding its purchase of some Lam polishers. AMD was the old SpeedFam's biggest customer. I hear that Intel (the old IPEC's biggest customer) does not use Lam. Anyway, AMAT's the biggest competition in this space and is beating both Lam and SFAM, so the argument's a bit irrelevant.
2. With $100M in cash, this company won't go out of business or have to take drastic financial steps any time soon. They should have a year or so to get this worked out before things are really dire. Of course, shareholders hope that it is only "timing" and "accounting-rule arcana" driving this, but as I've already said, there are fundamental problems, as well. Luckily, there is some time to get them fixed.
3. Historically, $9-$11 has been a good place to buy this stock. With $3.38 in cash, downside risk is limited somewhat from current levels (~$10).
4. My conclusion is that it's not quite as bad as the initial reaction might suggest, so I bought 3000 shares in the after-hours session last night at $10.125. If the stock bounces significantly today (to say, $14) I'd probably sell for a quick buck, but I don't expect that to happen and I'll be happy to hold if price stays low for a while.
Profitable investing,
Mr. Sam |
