I am betting against Louie at these prices & shorted today (starter position) @ $212. Planning to add more if the EOQ fund ramp-up continues tomorrow.
Read the merger prospectus. Many gems. MMC appears to be something of a turnaround project. Sales in recovery mode after losing IBM, margins not so good, etc.
About one-third of AMCC's 6/30 "pro-forma" income is generated from taxable interest income. Maybe a P/E of 15x on the pre-tax interest income is justified.
Their 21,000 s.f. in-house fab uses older 4" wafers and an old process. I presume this is mainly for the "old" products, not OC-192 stuff, but couldn't really tell.
So, strip out the real operating income, add in MMC and Rickey & Co. have some formidable challeges.
In addition to valuation, sector risk, merger risks, yadda yadda, shorted as somewhat of a hedge against long position in Nortel, from which AMCC derives 37% of sales.
I would be pleased to lose on this short if the "real story" is that Norty's optic business is still on fire and they buy a ton of chips from AMCC. As we all know, Norty's been hit pretty hard recently (yeah, it's not all optics, but that's the bulk of it) so there's an obvious disconnect in the market with AMCC continuing to rocket. MMC's big customer is Cisco, so the same connection could apply there, but less so.
Lastly, AMCC has a "gorilla" type valuation, but it is just one of many in a standards-based non-gorilla game.
So, we shall see... (and in any event, Louie needs to put down the pizza, get out of his armchair, and do a little DD to figure out at least what the company he owns actually makes.) |
