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Technology Stocks : Seeq Technology Coming Back....

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To: Joseph E. Caiazzo who wrote (693)	8/4/1997 9:50:00 AM
From: T Bowl	of 2127

To All: Here is how I read the latest #s. In order to make the current $0.09EPS estimate SEEQ has to have $12.9Mil in revenue this quarter. How do I get that #? Well, R&D expenses have been flat at $900k for the last few quarters so assume that stays the same. Marketing, General and Admin expenses have run around $1.3Mil for the last few quarters, I'll use the high of $1.44Mil in 1Q97. Assume gross margins stay at around 40% (as high as it's ever been). In order to make $0.09EPS for 31Mil shares they must have $2.8Mil in profits. Knowing those #s you can calc what revenue it takes to generate the $2.8Mil in earnings. Well, $12.9Mil is the number. That is a 70% increase over last quarter, but only 23% over last year. 3Q96 was a big quarter for them last year, but not in 95. Is revenue for 3Q97 supposed to be up that much? Where is this going to come from? The 10MB revenue seems to be falling. Gigabit revenue is not going to come in until well into 98. That leaves Fast Ethernet. This quarter they sold $5.0Mil in Fast Ethernet products according to their earnings release. The previous quarter was $3.85Mil. This was a 30% increase. A year earlier they had sold $1.85Mil in Fast Ethernet so it looks like momentum is growing for it. Assume that "other" revenue stays flat, they will need to sell $8.7Mil in Fast ethernet. In order to make the #s, SEEQ is going to have to increase Fast Ethernet sales by 75% That seems like a very big # to me. To recap: Est R&D = $900k Est Sales/Marketing = $1.44Mil Est Gross Margin = 40% Required Revenue = $12.9Mil I can bring the requried revenue down a bit by really giving the benefit of the doubt on sales/marketing and Gross Margins: Est R&D = $900k Est Sales/Marketing = $1.28Mil(last quarter) Est Gross Margin = 43%(another rise just like last quarter) Required Revenue = $11.6Mil Where have I gone wrong with my calcs??? Anyone have any feelings. I doesn't look like the lone analyst has changed estimates for the quarter so that's a good sign I guess. And 11,000 shares purchased by insiders in May @ $2.32... I'm still long, but nervous. todd

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