To All:
XICOR: Past, Present & Future general thoughts, most of these numbers are coming from memory since i left my stuff at the office this weekend, however, i wanted to post something regarding the latest quarterly report.
After the release of XICOR's great earnings i had to revisit the analyst projections from Goldmans and Lieberbaum. As we all know Xicor made the transition from 4" wafers to 6" wafers in 1992 and have been adding significantly to their capacity over the past few years. From everything that i can ascertain they are running at full capacity and demand for their product is GREAT. Now, lets put this all in perspective in relation to the analyst reports. #1 Lieberbaum analyst are projecting revenues to increase to $160 million for fiscal 1997, this is probably achievable given the added capacity, #2 Lieberbaum is projecting operating margins to increase to 45% by the 4th quarter of 1997 from the approximatly 40% now, this is probably why the market has discounted this stock down to $8+. The market is discouting all stocks which have earnings exposure to Flash, EProm, and EEProm devices. My feeling are that the market thinks that XICOR's earnings growth has already realized the benefits from the manufacturing efficiencies of moving from 4" to 6" wafers and the fact that they are admittedly at full capacity.
Why should we continue to hold XICOR given these constraints?
A few reasons quickly come to mind.
1. XICOR is only trading at a projected p/e of a little over 7 times 1997 earnings.
2. While given XICORS current product mix it's questionable whether they could reach a 45% operating margin by q4 1997, however, XICOR has publically committed to expanding its proprietary product mix to well over 50% which will dilute the effects of commodity pricing on its revenues, if you want to see those effects go look at the ATML graph.
3. Capacity is currently an issue, however, after many conversations with Raphael Klein i know he is planning to increase this significantly SOON.
4. XICOR is a small company, its much easier to steer to Porsche (XICOR) than a 18 wheeler (ATML), with todays shortened lead times on products XICOR may be more suited to satisfy customers needs and can tailor their products accordingly.
5. XICOR is one of the few semis that came close to analyst earnings projections, it just happened they got caught up in the SELL OFF.
6. Technically, the semi sector has only 12% of its stocks on a buy signal, this means that 88% are on a SELL signal. I hate to keep saying this but nearly everyone that wants to sell semi's have sold. While doesn't mean we are at the bottom it does mean that it can't go much lower, btw the semi sector has never been this low since the point & figure analyst that i folow have tracked the sector and they strted in 1987 just prior to the crash.
Thats it for now i have to go watch some olympics with my wife.
any comments?
blaine
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