THC, I absolutely believe SPCT is more competitive than Powerwave on both a cost of production, and on a technology basis. In fact, SPCT is the world's most competitive company in this business sector. They also have very interesting and well received ideas about future applications they are working on.
Nortel is budgeted to grow its business at 30% a year. An investment to supply themselves at this point would slow them down substantially. They are currently very happy with SPCT. To date, we have not seen a Telco Equipment company take this particular vertical integration step. I am confident they will continue with SPCT.
Sales are exploding as strong demand for Spectrian's new products continued last quarter, fueled by rapid growth in not only CDMA, but also by Nortel's GSM, TDMA and CDMA businesses and the Company's new CDMA business in Korea. SPCT's markets have gone from being dominated by cellular FM and TDMA in North America, to being nearly equally divided among TDMA, CDMA and GSM, and between PCS and cellular, with installations world-wide.
SPCT markets have become diversified technologically and geographically this past year which is enabling SPCT to fuel its growth rather substantially, and maintain/increase margins in the future. As SPCT continues to build this critical mass, they obviously become much more efficient and profitable.
Regarding LU, I think you mean will LU start outsourcing FROM SPCT, and I think the answer is yes. SPCT's technology, and low cost production will finally break the "loyalty" factor which is very common in this business.
Regarding revenues and earnings, all the public street estimates are too low. I believe fiscal 1998 street estimates are $2.33 per share pre new offering, or $1.90 post offering, or about $19,000,000. Conservatively, I expect revenues of $220,000,000 and net earnings of $30,000,000, or $3.00 per share for 1998. My fiscal 1999 forecast for revenues are $300,000,000, with net earnings of $48,000,000, or $4.80 per share.
Based on a PE of only 20, I expect a trading range of $60 to $100 during the next 12 months, with SPCT breaking over $50 by years' end.
I also expect a stock split to improve the stocks liquidity.
Good Trading. LF |
