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Technology Stocks : Xicor ?

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To: Shinobi who wrote (489)	7/23/1996 2:06:00 AM
From: Michael Sphar	of 2920

Hi Mr. Shinobi, Thank you for your provocative question, I hope others more knowledgable than I will jump in here and provide more insight. From examining the balance sheets and the operations statements, I see the Q1/Q2 reduction in deferred income on shipments to distributors. This deferred income is being carried as a liability to account for distributor customers warehousing product for eventual sale to third party customers. You can place a couple of spins on this. Perhaps the distributors didn't order as much this quarter ? Or perhaps the Disti customers bought more. Another take would be that revenues are shifting away from distributor sales to direct sales as Xicor does more direct work with OEM type customers. In any case its healthy for the balance sheet to reflect a lowering of this liability from a shareholder equity perspective especially when combined with an overall revenue increase comparing the same two quarters. A look at Inventories carried as an asset on the same balance sheet shows an opposite but proportionately lower trend. Inventories grew from $12.9M to $14.2M in Q1/Q2 ($1.329M increase or 10.3%). So this growth is less than the inventory reduction at the distributors. This is a reasonable growth given that revenues grew by $2.664M or 9% comparing Q1/Q2. Revenue growth of 9% per quarter means that the company could achieve $131M by year-end or be at an annualized run rate of $150M. A couple of items I notice on these sheets are (1) the significant increase in plant/equipment assets when compared with both the last two quarters. This increases by $13.3M since 12/31. Must be part of the new capital equipment expenditures previously talked about. (2) What exactly is accumulated deficit ? This is a big line item carried under Shareholders' equity. Now when I accumulate a deficit especially with my checking account, the bank kindly and quickly lets me know. Is this some sort of leftover from the bad old days of negative growth ? It seems to be declining with each report. I wish it would just go away, so I wouldn't have to worry about it. I think the bottom line here is that the company's business is growing well; that the customer mix is shifting away from distributor to end customers and/or there has been an increased demand for distributor supplied products. This tends to confirm management's statements about moving the company towards proprietary products, increased demand for product and an overall healthy business environment. Regards, Mike

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