Hello longhorn,
Thanks for the complement. I will try to live up to that description.
¯Can you spend some time to discuss what happened last week?®
The CEO did not guide the analysts with enough care. The expectations were too high.
Basically, the stock was running high on a correct assessment that the quarter to be reported would be good. From the chart, I would guess there were many momentum players aboard. Indeed the quarter came out above estimates. From Tom Lynch we know that the CEO was guiding the analysts accordingly. (Again, Tom, thanks for posting.) Therefore, some I-houses were putting clients in the stock. Drew Peck had a "Strong Buy" on the stock. He is followed by many investors. Apparently the CEO did not guide the analysts correctly. Tom had said that "orders are jumping."
However, the CEO did not imagine that the street would think that a drop in orders would be taken so strongly. The stock tanked on the opening because the backlog shortage and the growth rate slowdown was mentioned, but avoided in the conference call. The CEO gladly responded to Drew Peck's(TQNT promoter) questions of "Gross margins will be higher?" But then he deferred Jonathan Stone's (Adams Harkness & Hill) questions regarding backlog and book to bill ratios to the CFO by saying, "please refer any financial model questions to the CFO." Drew's gross margin question wasn't a model question?
The details of the bad parts of the conference call are in my post:
techstocks.com
From Dow Jones that day:
"The stock price peaked yesterday, and in light of a good - but not huge - upside surprise, people chose to take profits," said Jonathan Stone, an analyst at Adams Harkness & Hill Inc. "Particularly after the (second-half) uncertainty provided by management." In a conference call with analysts Wednesday, company officials said bookings looked sluggish because some of its customers were having delays in introducing new wireless telephone handsets. Triquint makes digital and integrated circuit products for the wireless communications industry. The company also said it plans to issue an equity offering, which raised investors' concerns about dilution, Stone said.
Some analysts felt that the CEO was painting a "too rosy" picture. Analysts don't like that. The next day, many of them reduced their estimates mainly due to the lower sequential growth news, fueling the tanking. Many money managers do not want to hold a stock waiting for orders that are not slated to appear until 1998. The stock was also richly valued to begin with. It had a price that could not hold up to any disappointments.
Tom stated that the fab has been capacity constrained. techstocks.com
But this was not the case by the end of the quarter.
DragonBoy correctly warned of running at undercapacity in the month of June. techstocks.com
I noticed a lead time reduction.
techstocks.com
Lead times are a great indication of fab capacity. If any analyst says the fab is at capacity, and the lead times are in the 8 to 12 week time frame, don't believe them. The customer is always right. The CEO mentioned in the call that the lead times were at 12 weeks, down from 24 weeks(my exact numbers) when they were fab constrained in the past. In addition, the CEO mentioned that they have plenty of capacity right now.
Hope that explains what happened.
I'll try my hand at the future in my next post.
Rex |
