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Technology Stocks : MEMC INT'L. (WFR -NYSE) The Sleeping Giant?
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To: Mephisto who wrote (676)8/25/1996 4:42:00 PM
From: Zeev Hed   of 4697
 
Mephisto: From many of the companies participating in the semiconductor business, WFR is probably one of the more immune to the cycle. The reason is simple, depsite declines in the BB ratio the numbers of dies shipped usually increases year over year in this industry. The decline in the BB reflects price declines more than unit shipped declines. The main reason, IMHO for the decline in WFR in the last few months is that the growth rate expected of 25% would probably not materialize, namely unit shipments in the semi inductry may be lower than the norm. Furthermore, an additional trend tends to decrease the demand for wafers, and this is the decline in "foot print" for a specific die, which is driven by the transition to smaller and smaller features in the wafer fab. While I do not foresee quarter over quarter declines for WFR, it is not impossible for that to happen if the BB stays under 1 for a long time (more than six months now and very low BB as well). If this situation continues, it is quite possible that SH will use the occasion to increase its market share by price reductions and WFR will have to match them. If such a scenario evolves, we could see pressure on margins as well as on unit shipments. Is it possible that the low PE accorded to a company growing at 25%/year is due to a fear in the market that such a scenario evolves?

Zeev
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