IR: TER mgmt has been considering unlocking shrholders value all along
Just finished talking to Tom Newman, TER's IR. He said the Connection System story is getting better every qtr. TER had considered spinning-off the CS 2 - 3 yrs ago. However, at the time the EMS (Electronics Manufacturing Service) sector didn't garner the same respect and high PE as today. Time has changed. Cos such as Samina (PE=104.5), Jabil Circuit(64), Solectron (57.5), Flextronics (103.8)has such high PEs even with today severe market correction. Even the one highly exposed to the down-trodden PC mkt, SCI has a PE of 25. Whereas, TER has a pitiful CY01 PE of 8.1, P/2000S=1.9.
EMS is fundamentally decoupled from TER's core biz.
I told him that subtracting the CS, TER has been beaten down by 110% thereby having negative Enterprise value for a multibillion dollar biz. A legal steal by any definition.
He assured me repeatedly that the board and mgmt have considered many alternatives to unlock shareholders' value such as issuing tracking stock, spinning-off.
Historically, tracking stocks have not done well. He agreed that spinning-off via IPO, or spin-off but retain an equity stake like Empirix - the SW biz - might be the best way to do it. I mentioned SEG to him. Seagate has done everything they could for shareholders by giving cash and Veritas stock to shareholders.
He said the board is actively looking, working, thinking about how best to unlock shareholders although they have not announced this or set a timetable for making a decision.
Obviously, they showed a willingness to unlock shareholders' values. They empathized and felt the hardship that its shareholders and employees have endured. They indeed have been exploring all alternatives although he didn't expect a decision to be made in the next month or so.
This is very encouraging. IMHO, there will be more queries on this subject at analyst meeting and shareholder meeting reaching a crescendo. We have a good shot of hearing a decision in the next few mos.
Tom reaffirmed the CFO said that TER would gain 2-4 % total test mkt shr this year.
We also discussed about possible merger.
Advantest is the dominant player in Memory test holding 48% mkt shr vs TER's 12% share (4:1) last year. In contrast, TER has 2:1 lead in logic testing, and 2:1 lead in SoC test.
A merger w/ Advantest would trigger a terrible reaction as they would dominate testing.
A merger w/ Agilent might be more receptive. A's product line only overlaps TER's by 10%. A merger w/ others are unlikely as all players mkt cap are very low. |
