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Non-Tech : SMARTFLEX ALSO MEMBER OF THE IOMG FAMILY
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To: rich evans who wrote (223)7/9/1997 6:26:00 PM
From: Douglas V. Fant   of 558
 
Ian,

Rich and Joe answered your question nicely with financial data. I'll just add a couple of items. You are correct that margins havce dropped at both SFLX and AFLX. They have dropped for different reasons however. AFLX has added about 50% telecommnications customers business which has lower margins than sales to the DD drive customers, and these additions have caused reduced margins.

SFLX's margins on the other hand have dropped due to inability to obtain sufficient parts to maximize their manufacturing facilities and resulting capcity underutilization. SFLX faces that same problem now, but for a different reason, having expanded factory capacity to ramp up production for SEG, but SEG cut back on 4/9 gig orders which are about 10% of SFLX's business (1/2 of its business with SEG).

Also SFLX has been profitable for six years running; so I'll bet that the latest "snafu" again will not drag SFLX too far down. (Four largest customers are QNTM, SEG, IBM ,and HP, but with growing business from IOM, and now new business from WDC- a new FCOF application- and a volume ramp up of a mid range drive for a yet-to-be-announced Asian DD maker).

So in that sense looking forward I see SFLX to be similar to INVX, except that INVX sells leads to DD makers while SFLX sells flexible circuits across a similar spectrum of DD makers; the benefit of SFLX is that it is selling not too far above its book value. So I'm willing to bet that SFLX will not collapse and disappear. Indded I expect a recovery to begin for SFLX just like it began today for APM another one of my DD parts maker holdings....

Sincerely,

Doug F.

P.S. If you want an INVX "look- a-like", but at a better price consider INAC....
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