Paul,
With the earnings shortfall last quarter SFLX is a "show me" stock- i.e., 8 weeks from now when the next earnings report comes out, it needs to show some steps toward making those improved earnings.
One thing to watch for would be a volume order from its potentially new customer WDC. That would be important because SFLX would then be shipping to IOM,QNTM,SEG, WDC, and MXTR-i.e., SFLX would then become very similar to an Innovex (INVX) who ships lead wire assemblies to almost all disk drive makers. That is, Smartflex, like Innovex would become essentially a "volume play" on the disk drive market generally rather than a proxy for any one company in the industry itself.
Second Smartflex' new Flip-Chip-On-Flex Technology is very important as it represents a whole new frontier in ECM work for the company. Basically the flexible semiconductor chip market is heavily fractured between about 200 manufacturers currently. Flexible chips are the wave of the future as original equipment manufacturers try to make their equipment slimmer, lighter, and smaller in order to appeal to the consumer.
This includes an incredible array of devices- laptop computers, cell phones, pagers, medical scanners, I/C arrays in satellites, automoblie "smartbrains", electrical probes, portable machinery testing & analysis equipment- the list is endless. A lot of original equipment manufacturers currently make their own one, two, or three flex circuits necessary for their own OEM products with IBMand 3M being two big examples.
But as companies such as SFLX become proficient in quickly designing, testing, & manufacturing flexible chips/circuits, expect the OEM's just like is happening elsewhere in the computer industry, to start to "farm out" their flex chip work to ECM companies.
That is, SFLX has two potential routes to build business each of which is independently significant to the company (or to an acquirer!).... So yes SFLX may "drag along the bottom in the undertow" for a while, but it clearly has the potential to resurface, right itself,and again become a champion surfer.
Sincerely,
Doug F. |
