Art
SNDK's B/S is actually not as strong as it appears when you consider that they have a $1.25B capex commitment to fund 50% of Fab3 through 05 and 06. I actually think they will need to go back to the capital markets sometime in 05, depending on conditions, as they aren't generating enough FCF. In fact, in Q3 they generated -$16M and for the 9 months in 04 thus far they have only generated $102M. I generated my FCF numbers for SNDK using the following formula....
OPAT (@ 37% tax) + depr - capex
Also, inventory growth is far outpacing sales growth, turns are slowing, and finished goods are piling up. In Q304, product revenue was up 41% Y/Y and inventory was up 91% Y/Y. Thus, the fire sale to sell product that you see occurring in the marketplace. It will be interesting to see if Q4 demand is strong enough to soak up the excess supply in the marketplace and "rebalance" supply with demand. I doubt it with Hynix, Micron, Infineon, and STMicr getting into the business. Starting to look just like the brutal DRAM marketplace.
Another question, what applications are there in the marketplace that really require a 512M, 1G, or 2G card? I know there are a few, but not enough.
Best,
Broozer |
