I would like to answer a few questions about my analysis on Catalyst Semiconductor.
First, their core busienss is design, not manufacturing. All manufacturing is outsourced-- the largest supplier is OKI Electronics, in Japan. The company's value-add is an intellectual property on several non-volatle chips (E-PROM, EE-Prom, etc.)
Second, the myths about the insiders selling all their stock -- it is not entirely true. The key four board members have a combined 1,500,000 in stock and options that are tight up to the company's performance. In addition, they are trying to pass a proxy now that will distribute stock among employees. That will produce a will to produce additional value-add.
Third, this company had changed in fiscal year to end on April 31, instead of March 31 for the fiscal year'97. Their first quarter of FY'97 should be ending July 31, 1996. The earnings are scheduled to come out on August 21, 1996.
The company's revenue for FY'96 had been stronger outside of US (60%). This means any fluctuations in dollar could cost them bottom line results. In addition, they have to rely on the OKI to meet most of customer orders. By the way, OKI owns 8% of the company at this time.
May be this is my wishful thinking, but based on my analysis, I believe that the company has a great potential to grow. $20 a share may be a stretch, however, lokking at their financials, I believe they should be in the position to earn 15 cents this quarter, but who knows? there were a lot of surprises this summer. I am still very bullish on the company and believe they have a great potential.
|
