Last Report by Prud.
EQUITY RESEARCH
Alliance Semiconductor (ALSC) / Semiconductors
January 22, 2001
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Rating: ACCUMULATE Target Price: $18 Risk: HIGH QV: 5 (01/20)
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EQUITY RESEARCH TOTAL RETURN / RELATIVE PERFORMANCE RETURN(%) VS.SP500(%)RESEARCH ANALYST: HANS MOSESMANN LAST MONTH: 24.90 21.40 LAST REPORT: 01/17/00 LAST QUARTER: -12.10 -8.60 INDUSTRY RATING: SBUY YTD: 35.90 33.60 LAST YEAR: -5.40 1.60
EARNINGS SNAPSHOT MARKET PROFILE QUARTER EST FISCAL YEAR GROWTH SHS (MIL) BAL SHEET TRADE 4Q/MAR: $0.15 03/00 : $0.06A 5 YR EST O/S: 41.29 BOOK: $22.11 EXCH: NASDYR AGO: $0.05 03/01 : $0.72E EPS: FLOAT: 24.9 DIVD: OPTS: DUE ON: 03/02 : $0.70E DIV: INSTL: 45% DEBT/CAP: 0.47%
RECENT RATING HISTORY LAST RATING CHANGE: FROM STRONG BUY ON 12/15/00 AT 13 5/16 DJIA: 10435
Company Description:--------------------------------------------------------------------------------Alliance Semiconductor (ALSC), headquartered in Santa Clara, CA, designs,develops, and markets high performance memory and memory intensive logicproducts. The company's core product lines include static random accessmemory, dynamic random access memory and flash memory. Alliance markets itsproducts to the desktop and portable computing, networking, telecommunications,and instrumentation markets. Investment Opinion: 01/17/01 at $15 27/32--------------------------------------------------------------------------------We rate ALSC an ACCUMULATE for the following reasons: * We believe that Alliance is well positioned to take advantage of anyimproving demand for SRAM, DRAM, and flash memory chips. While near termdemand has been lackluster, we believe ALSC is well positioned for an eventualrebound in chip demand. * While competitors often face production crunches as demand for chipsimproves, ALSC has ample production capacity thanks to its equity ventures intwo fabrication facilities - United Microelectronics (UMC) and CharteredSemiconductor (CHRT). These investments provide them with the ability tosupport production for a $600 to $800 million company. * While we remain concerned about the company's operations--visibility remainsquite poor with order cancellations and push outs creating an over-inventorysituation--we believe that the company's significant equity investments, whichwe value at some 8 13/16 per share, should limit downside in the stock. -- Alliance maintains a substantial private and public equity portfoliocontaining some of the strongest players in the semiconductor industry. Theirholdings include some 340 million shares of United Micro, 1.64 million sharesof Chartered Semiconductor, 237,000 shares of Broadcom (BRCM), 728,000 sharesof Vitesse Semiconductor (VTSS), and 68,000 shares of PMC Sierra (PMCS). Webelieve this portfolio provides ALSC with some downside protection. Last Earnings Estimate Change: 01/17/01--------------------------------------------------------------------------------FY01 EPS estimate reduced from $0.73 to $0.72.FY02 EPS estimate reduced from $0.80 to $0.70. Earnings Update: 01/16/01--------------------------------------------------------------------------------ALSC reported 3Q01 EPS of $0.22 versus $0.04, in-line with our estimate. Footnote: Prudential Securities Incorporated makes a primary over-the-countermarket in the shares of Alliance Semiconductor.
Any OTC-traded securities or non-U.S. companies mentioned in this report may not be cleared for sale in all states.
See BLUE on ERA.
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