W) Is EMKR emerging?
Rated a WATCH
Reason for DD
On Watch list.
Business
EMCORE Corporation designs, develops and manufactures compound semiconductor materials and is a leading developer and manufacturer of the tools and manufacturing processes used to fabricate compound semiconductor wafers and devices. Wafers and devices include solar cells, high-brightness light-emitting diodes, vertical cavity surface-emitting lasers, magneto resistive sensors, and radio frequency materials. EMCORE's products and technology enable its customers to manufacture commercial volumes of high-performance electronic devices using compound semiconductors. EMCORE's products are used for a wide variety of applications in the communications (satellite, data, telecommunications and wireless), consumer and automotive electronics, computers and peripherals and lighting markets. Support services account for about a fourth of sales. EMCORE's numerous joint ventures include pacts with General Electric and Uniroyal for high-intensity light-emitting diodes, and with Optek Technology for sensors. The company also has alliances with GM, Sumitomo, and Tyco. Nearly half of EMCORE's sales are in Asia.
Competitors
KOPN, CREE, IQE, AXT,
News
11/15/00 Backlog climbs 190% to Company record of $125 million
* EMCORE raises FY 2001 revenue estimates to $193 million
10/30/00 9:04 AM ET
Emcore (EMKR:Nasdaq - news), a maker of semiconductor materials, was up 12.2% in preopen Island trading after it raised its revenue estimates for 2001 and said it accelerated research and development programs in its fiber-optic and wireless divisions.
10/19/00 - EMCORE has received a $10.7 million order from ANADIGICS, Inc., a leading supplier of wireless and broadband communications solutions, to supply 6-inch GaAs (gallium arsenide) HBT and pHEMT wafers for their fiber optic and wireless communications devices. ANADIGICS will be using the epiwafers for power amplifiers for GSM, TDMA and CDMA multi-band wireless handsets and for high-speed digital components for OC-192 data communication applications.
24-Aug-00 BEFORE THE OPEN
EMCORE Corp. (EMKR) 98 1/16: Announces that its Board of Directors has declared a 2-1 stock split; payable on September 25;
June 2000, EMCORE and JDS Uniphase executed a Joint Development Manufacturing and Marketing Agreement (the "Agreement"). Under the Agreement, EMCORE and JDS Uniphase will jointly develop, manufacture and market a family of fiberoptic array transceivers based on EMCORE's laser technology that facilitates light to logic (electronic signal in/modulated light signal out) for fiberoptic communications solutions used in switches, routers and computer backplanes for OC-192, OC-768 and other proprietary network designs. EMCORE will manufacture VCSEL arrays and design gigabit speed control circuits, photodetectors, optical links and other components. JDS Uniphase will handle all marketing, worldwide sales, application support, customer service and distribution functions and will assist EMCORE with technical support for the optical packaging and testing for the products. The initial product developed and commercialized in this alliance with JDS Uniphase will be an array transceiver with twelve channels each operating at 1.25 Gigabits/second, yielding a compact, high speed data link. These products are designed to make possible short distance links between dense wavelength division multiplexing systems (DWDM), high-speed routers and SONET (long-haul telecommunications) equipment. EMCORE expects to begin shipping samples of an array transceiver by the fourth calendar quarter of 2000;
May 2000, EMCORE signed an agreement with Motorola to meet their requirements for epitaxial tools, wireless electronic materials and technology. This relationship includes supplying Motorola with epitaxial process technology and multiple MOCVD production tools, as well as purchase orders for electronic device epitaxial wafers. Motorola also announced that EMCORE was awarded their Standard Supplier Designation, making EMCORE the only qualified supplier of MOCVD tools for Motorola's compound semiconductor factories;
17-Mar-00 11:00 -- 12:00 ET
EMCORE Corp. (EMKR) 125 -7 3/4: Prudential upgrades to STRONG BUY from ACCUMULATE and raises price target to $180 from $160; demand for products is greater than expected and realtionship with JDS Uniphase (JDSU) could be strengthened.
January 2000, EMCORE entered into a three-year supply agreement with Agilent, a leading supplier of fiberoptic transceivers and integrated circuits for infrastructure products for the Internet. Under this agreement, EMCORE will manufacture Gigarray(R) VCSEL arrays for use in parallel optical transceivers. The initial purchase order under the agreement is contingent upon EMCORE's development of a component that meets Agilent's specifications. EMCORE began shipping sample products in the quarter ended June 30, 2000, with full commercial shipments commencing by calendar year-end;
May 1999, General Electric Lighting and the Company formed GELcore, a joint venture to develop and market High Brightness Light-Emitting Diode ("HB LED") lighting products. General Electric Lighting and the Company have agreed that this joint venture will be the exclusive vehicle for each party's participation in solid state lighting. Under the terms of the joint venture agreement, the Company has a 49% non-controlling interest in the GELcore venture and accounts for its investment under the equity method of accounting. In June 2000, the Company invested an additional $3.9 million in this venture. For the nine-month period ended June 30, 2000, the Company recognized a loss of $3.7 million related to this joint venture which has been recorded as a component of other income and expense. As of June 30, 2000, the Company's net investment in this joint venture amounted to $5.6 million.
November 1998, EMCORE signed a long-term supply agreement with Space Systems/Loral, a wholly owned subsidiary of Loral Space & Communications. Under this agreement, EMCORE supplies compound semiconductor high-efficiency gallium arsenide solar cells for Loral's satellites. EMCORE began shipping solar cells in December 1999 and has already completed initial purchase orders totaling over $11.9 million.
Analysts and Other
9/7/00 The story surrounding Emcore (EMKR:Nasdaq - news) much of this year -- at least the story being told by Wall Street and chatted up by the compound semiconductor material company, and the story driving its stock -- has been about its relationship with JDS Uniphase (JDSU:Nasdaq - news), the sizzling fiber optics-connector company. (A dream relationship for any company looking for ways to bolster its credibility.) But you can't really help but wonder just how significant the JDS story really is, and whether Wall Street overreacted to news that it wanted to hear, rather than news that is really significant. After all, without even issuing a formal press release about its relationship, Emcore has seen its stock, at its peak, add more than $1 billion based almost exclusively (or so it would seem) on the JDS news. Our story started back in February -- let's say Feb. 11, just to give you a time frame. On that day, Emcore was trading at $56. By the following Wednesday, Feb. 16, it had jumped to $88 on no news. But after the close on that day, Emcore filed a Form 8-K with the Securities and Exchange Commission to disclose that it had signed a memorandum of understanding with JDS "to jointly develop, manufacture and market a family of fiber-optic array transceivers." (An 8-K is the "current report" used to report material events or corporate changes that have previously not been reported by the company in a quarterly report (Form 10-Q) or annual report (Form 10-K).)
The very next day, Emcore's stock immediately leaped to $140, and the following day, it rose as high as $173. On Feb. 25, the company issued 1 million shares of stock at $136 per share. On that same day, analyst Hans Mosesmann of Prudential, Emcore's lead underwriter, wrote about Emcore's "budding" relationship with JDS. He went so far as to slap a $160, 12-month target on Emcore's stock based, in part, on the value of JDS' stock. In a conference call the next day, Emcore CEO Reuben Richards talked about Emcore's "expanded" agreement with JDS.
Emcore's stock, however, subsequently started drifting lower, falling as low as $44 on April 14, before starting a slow but steady rebound. Then, on June 21, Emcore filed an 8-K with the SEC disclosing that five days earlier it had formalized its JDS deal with a "joint development, manufacturing and marketing agreement." A big deal, right? You'd think so, judging by the way Emcore's stock zoomed on the disclosure. However, these questions: If it were that big of a deal, why did Emcore disclose the news only in the 8-K? (Nobody leaves material news to an 8-K unless the news is bad!) If it were that material, why didn't Emcore also issue a press release?
(Most companies issue press releases every time the CEO sneezes! And to be fair, the closest Emcore ever came to that was when it announced its CEO was going to be on CNBC.) And if it were that material (with a potential market of $1 billion in 2002, according to the company), why wasn't a joint press release issued by Emcore and JDS? (Could it be that, to JDS, the Emcore relationship was just another manufacturing deal that wasn't significant enough to warrant an announcement?) JDS flat-out refuses to discuss the deal, and Emcore CFO Tom Werthan says that Emcore's policy isn't to issue press releases until products are released. The product in question, which helps transmit data via fiber optics between banks of routers, isn't expected to be released until the first quarter of next year. Test versions aren't even expected to be rolled out until next quarter. What's more, despite Mosesmann's estimates, which include prices of $350 to $400 per unit, it's unclear just how much Emcore will really make from these products. "We don't know what the gross profit will be yet," Werthan says. Well, that doesn't really matter. The JDS part of the story was yesterday's news. Mosesmann told me yesterday that at its heights, Emcore's stock might have gotten ahead of itself, and that JDS is now fully factored into the stock. Next year, in fact, he doesn't expect JDS to account for more than $20 million in sales (compared with Mosesmann's earlier estimates that initial product orders will reach $35 million to $45 million). The Emcore story, says Mosesmann, is now "much more diversified" than JDS. He had better hope so. With a market value of $2 billion, sales for the past 12 months of just $85 million and an accumulated deficit of $95.7 million, Emcore needs more than what might come from JDS to keep investors happy. – Herb Greenberg of TSCM
Numbers
Revs 17.7M to 14.4M to 16.5 to 23.9 to 30.0M to 34.1M Sep00
EPS (0.27) to (0.25) to (0.25) to (0.14) to (0.05) to (0.36) Sep00
Note: negative surprise in last four of five quarters
Dec00 is estimated to be (0.13)
52-Week Low on 17-Dec-1999 $11.344
Recent Price $47.875
52-Week High on 18-Feb-2000 $86.50
Market Capitalization $1.28B
Shares Outstanding 26.7M
Float 19.2M
Price/Book (mrq) 6.42
Price/Earnings N/A
Price/Sales (ttm) 14.23
EBITDA (ttm) -$11.5M
Debt/Equity (mrq) 0
Total Cash (mrq) $101.7M
Short Interest As of 10-Nov-2000 Shares Short 1.94M
Percent of Float 10.1%
Internet Posts of Note
The competition in the MOCVD epitaxial market should be very interesting over the next year or so. With all of the MOCVD systems which are being installed (not to mention MBE systems), capacity will far exceed demand. With the shift from PHEMT and AlGaAs HBTs to InGaP HBTs expected in the market, there will likely be some serious competiton and possible shifts in market share. The number of wireless handsets is not increasing fast enough to support all that capacity - there will definitely be winners and losers.. By the way,I forgot to mention Hitachi Cable in Japan which has a very large MOCVD epi business. It is quite possible that they are larger than Kopin and Emcore, but the numbers are pretty hard to find. 9/23/00 on yahoo mw5
Kopin and Emcore appear to be roughly comparable in sales according to the publicly available information (Emcore had slightly higher sales, but roughly 25% of that is equipment). The two are also about equal in market cap. 9/20/00 on yahoo docdave
doctordave is correct that IQE uses (mostly?)MBE technology for their US facility, but the UK facility is mostly MOVPE, and is one of the dominant sources of MOVPE wafers for optical applications - lasers, LEDs, photodetectors. Also, I do not have up to date information, but Kopin has very large MOVPE production - probably larger than EMCORE. EMCORE's materials business is a relative newcomer - they were a machine company until fairly recently. Kopin has had a strong business with Conexant. I would want to see some convicing information before I will believe that EMCORE's operation is bigger than Kopin's. 9/15/00 on yahoo mw5
IQE is by far the largest of the MBE wafer suppliers. Emcore is the largest of the MOVPE wafer suppliers. 9/18/00 on yahoo docdave
I like both Emcore and Cree, but I think the choice between them boils down to diversity vs. focus. Emcore had a more diverse product line (solar cells, LEDs, HBTs, HEMTs, VCSELs, equipment), and Cree is really in the driver's seat in some key LED technologies. As has been pointed out repeatedly by aqualung Harry, there is quite a bit of competition for Emcore in most of their businesses (especially the hot VCSEL and HBT lines), but I do think they hold some key technology advantages, in that they have special epitaxial materials expertise garnered from years of making MOVPE equipment.
My own personal bet is with Emcore over the long run, but I wouldn't mind owning Cree also, especially at its present share price. 9/16/00 on yahoo docdave
Insiders
12 insider sales with some buys. Many options being exercised.
64% institutions up form 36% a year ago. General Electric is a top ten holder.
Chart
Triple bottom, but low Highs in last three peaks. $30 is support.
Links
emcore.com
Summary
I don’t like the balance sheet. This stock has ben up on future hype and hope, not improving fundementals. The Indium Phosphate deal with ANAD sounds good until you realize that ANAD and RFMD both reported slowing wireless sales. Whether the InPh takes off remains to be seen. The LOR deal seems to be a boring issue as GaAr can be supplied by others than EMKR. Also LOR taking a beating since GSTRF fiasco. I see LOR decreasing purchases from EMKR unless Bush ups the defense satellite budget. If it does, no guarantees that EMKR will be supplier of choice. No real news of MOT, GE, JDU, and A alliances helping the bottom line. Alliances are nice but can also be a dead end if nothing comes out of it. That being said a 1.28B Marketcap is cheap if the products start to accelerate. The backlog is huge as EMKR seems to be a research powerhouse rather than a manufacturing company. The risk/reward equation is bleak. I see a $30 for downside and $60 upside through April. Rated a WATCH.
Jack |
