Spoke with Al Castleman (CFO) today.
Given the grim words from KMAG today re their SEG program, we could use some insight. I'm working from memory here. (We talked prior to the KMAG news.)
The problem, as I understand it, relates to SEG's lack of visibility on the higher end programs that SFLX is involved in. Apparently, it remains unclear to SFLX (and even SEG) whether the weakness is due to inventory related issues or to market share shift. With just a few days remaining in the Q, all bets are off regarding the final numbers.
Al does feel there will be a Q2 bottom line impact from this issue, as well as the recent move into the new Monterrey facility.
He said that if the SEG high-end situation is inventory related, the effect on SFLX could be as brief as two weeks to several months. He seemed optimistic about Q4 and cautiously optimistic about Q3.
Al did confirm that he bought 10,000 shares last month. This was prior to the SEG caution. SFLX did not anticipate the situation; they had been told that SEG wanted as many 9-gig drives as could be assembled, and both parties were making progress solving the component shortage related to this program. Those additional suppliers are now up and running, and he indicated that SFLX will not be caught with purchase obligations on raw materials. I understood him to say that any such committments would be the burden of the customer.
He was at a loss about the SFLX/AFLX price disparity. (I believe AFLX moved up again today?) He cited SFLX's strong book value, and believes they'll come in at about the $4/share cash level again.
He confirmed that SFLX has WDC programs underway, and that SFLX is the sole supplier of flex for Zip drives. I asked if SFLX would be able to meet demand should IOM get some major OEM wins for boxes. He said no problem; they're building Zip drives at the new Monterrey facility.
Personally, I'll take the long term approach on this one. IMO, SEG has already done much of their damage (a la some hideous march to the sea), and the future for Flex in all sorts of devices is a bright one.
Bill |
