you:
hey bobs, what quarter do you think they can be in the black? when i look at yahoo consensus eps estimates, they are negative for 2008 as well as 2009. there is no analyst that is expecting spsn to make any money this year but the high est for 2009 is +0.37 though.
me:
Well, I've already posted about this, but from my point of view q1 sees another 25%+ reduction in the loss(to about $30M). Most of that will depend on how the demand situation holds up, particularly in the wireless area. Also, it's going to depend a lot on how fast SPSN stops using TSMC as a foundry and what is happening to ASPs mainly because of NAND competition.
Currently, I see Q2 close to, or at BE. The same caveats as q1 apply with CSID business again increasing. In q3 SPSN needs to start selling Eclipse with a lot of the BIST functionality activated. Higher density 65nm chips, across the board, should start to appear in volume which should help ASPs. It's too far out to say just how profitable SPSN will be, but at BE the stock should start to recover some plausibility and begin creeping out of the price abyss.
A couple of things; first I think MirrorBit at 90nm is more than competitive with any other NOR products out on the market. In 07 MirrorBit was about 2/3 rds of production. In 08 that is is going to increase to about 80% which should make SPSN price dominant in practically all areas. Second, cash flows should increase a lot from last years $195m which included $128m in inventory build up that wont happen in 08. Thirdly, there are some kickers out there such as server Eclipse that could add to the bottom line.
Overall I'm a little more optimistic than what management has been willing to commit to. It does look like SPSN has bottomed, but there are other longer term problems. These principally include falling revenues in a business where high fixed production costs make competing very expensive. ROI is a very big problem. The other side of that problem is that SPSN has made the commitment and because of various problems including financing, it doesn't look like the competition has the desire to match SPSN's investment. So the real question is can SPSN, long term, generate enough sustainable revenue to cover replacement costs and produce a modest profit? That's something we may not know until q4 or later. |
