Lehman's post earning and conference call report on IDTI (10/15/97)
Headline: Integrated Dev. Tech: Post Close IDTI reports $0.03 2QFY98
Author: M. A. Gumport, CFA 1(212)526-5368/T. Berg -5276
Company: IDTI
Industry: SEMICO
Ticker : IDTI Rank(Prev): 1-Buy Rank(Curr): 1-Buy
Price : $13 52wk Range: $15 1/2 -7 5/8 Price Target: $ 17
Today's Date : 10/15/97
Fiscal Year : MAR
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EPS 1997 1998 1999 2000
QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr.
1st: 0.11A 0.02A 0.02A 0.12E 0.12E 0.25E 0.25E
2nd: -0.13A@ 0.01E 0.03A@ 0.14E 0.14E 0.30E 0.30E
3rd: -0.55A@ 0.04E 0.01E 0.17E 0.17E 0.30E 0.30E
4th: 0.03A@ 0.08E 0.07E 0.22E 0.22E 0.35E 0.35E
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Year:$ -0.54A@ $ 0.15E $ 0.13E $ 0.65E $ 0.65E $ 1.20E $ 1.20E
Street Est.: $ 0.19E $ 0.17E $ 0.80E $ 0.77E $ - - $ - -
@-Includes: FY2Q97 $-0.08 inventory write down, FY3Q97 $-0.48 restructuring,
FY4Q97 $+0.01 nonrecurring, FY2Q98 $0.01 after tax net of bad debt reversal,
foreign exchange loss and charges related to marketing of C6 mpu.
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Revenue (1997) : $537.2 Mil. Proj. 5yr EPS Grth : 6.0 %
Return On Equity : -5.9 % Dividend Yield : 0.0%
Shares Outstanding* : 89.5 Mil. Book*/Price to Book: $8.06; 1.61x
Mkt Capitalization* : 1163.5 Mil. P/E FY98; FY99 : 100.0x;20.0x
Net Cash per Share* : $2.22 Convertible : Yes
Disclosure(s) : G,C, A
*Includes convertible as equity
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** IDTI POST CLOSE 10/14 REPORTS SEPT. FY2Q98 EPS OF $0.03 (INCLUDES $+0.01
NONRECURRING) VS. OUR $0.01 TARGET. SHORT TERM EPS PROSPECTS WEAK DUE TO NEW
FACTORY AND NEW PRODUCT COSTS. PRICING HAS TURNED SLIGHTLY MORE FAVORABLE FOR
COMMODITIES, AND NEW PRODUCTS (CENTAUR X86 AND CLEAR LOGIC FPGA) APPEAR TO
HAVE MAJOR UPSIDE. DESPITE LIMITED NEAR TERM VISIBILTY AND MOMENTUM, WE
CONTINUE TO BELIEVE OUTLOOK DURING THE NEXT YEAR IS EXCEPTIONAL. FY98 EPS
PROJECTIONS FINE TUNED, AND PRICE TARGET EDGED HIGHER TO $17 (OLD: $15).
*****************************************************************************
10/14 POST CLOSE IDTI REPORTED EPS (INCLUDING $0.01 NONRECUR. ITEMS) OF $0.03
VS. OUR TARGET OF $0.01. Vs our targets, sales 3% below June FY1Q98 were $5.2
short (-3.5%) but EBITD $+2.0 mil. (+6.3%). Gross margin (GM) at 38.4% was
1.5 points above target (each margin point impacts quarterly EPS by over
$0.01), and op. expense ratio at 35.2% was on target despite the sales
shortfall.
POSITIVES. Roll out of higher margin new products should diversify product
lines. Centaur C6 X86 volume begins March FY4Q98. New Clear Logic (FPGA
replacement part) is not well known by analysts and has the potential to be a
major upside surprise. A graphics line will role out June FY1Q99. Commodity
memory prices have firmed slightly, so ongoing roughly breakeven performance
is more a reflection of fab start up expenses than a worsening environment.
Capacity utilization should rise from roughly 70% to perhaps as high as 90%
during the next 9 months, and that should provide a strong boost to GM.
NEGATIVES. Management guidance suggests flat Dec. FY3Q98 sales and EPS around
$0.00. Business in the communications sector is soft, and IDTI will be more
heavily turns dependent than usual this quarter. ..(Cont'd)
IDTI (Cont'd) P.2
EPS PROJECTIONS FINE TUNED; 1 YEAR TARGET EDGES UP TO $17. Reflecting poor
near term results but the potential for new products to push sales and margins
much higher as early as March FY4Q98, we project FY98 at $0.13 (old:$0.15),
FY99 at $0.65, FY00 at $1.20. Based on higher valuations on chip stocks in
general during the past few months plus our increasing interest in IDTI's
diversification program, we believe a $17 1-year target is attainable.
-------9/30/96--- --------9/30/97------------------
IDTI FY2Q98 ---SEE NOTE 1---- -LB EST Actual--SEE NOTE 2 Vs.
-$Mil.- -Ratio-- -$Mil.-- -$Mil.-- -Ratio--- Est.
Sales (ratio: % ch.) $ 120.5 ( 32.5)% $ 149.0 $ 143.8 19.4 % $-5.2
SRAM $ 33.7 ( 62.9) $ --.- $ --.- --.- %
Specialty Memory $ 45.8 11.5 $ --.- $ --.- --.- %
Logic $ 26.5 ( 7.2) $ --.- $ ---- --.- %
RISC $ 14.5 ( 19.0) $ --.- $ --.- --.- %
DRAM $ --.- --.- $ --.- $ --.- --.- %
CGS (ratio: % of sales)1,2$( 46.1) ( 38.3)% $( 64.5) $( 59.1) ( 41.1)%
R&D (ratio: % of sales) $( 37.8) ( 31.3)% $( 29.5) $( 30.6) ( 21.3)%
SG&A (ratio: % of sales)-2$( 18.3) ( 15.2)% $( 23.0) $( 20.0) ( 13.9)%
EBITD (ratio: margin) $ 18.4 15.3 % $ 32.0 $ 34.0 23.6 % $+2.0
Dep. (ratio: % of sales) $( 26.2) ( 21.7)% $( 29.5) $( 29.5) ( 20.5)%
Int. (ratio: % of sales) $ 2.1 1.7 % $( 1.7) $( 0.9) ( 0.6)%
Nonrec. (r:% of sales)-1,2$( 10.0) ( 8.3)% $ 0.0 $ --.- --.- %
Pretax Inc.(ratio: margin)$( 15.8) ( 13.1)% $ 0.8 $ 3.6 2.5 %
Tax (ratio: tax rate) $ 5.4 ( 34.5)% $( 0.2) $( 1.0) (28.1)%
Net Inc. (ratio: margin) $( 10.3) ( 8.6)% $ 0.6 $ 2.6 1.8 %
EPS (ratio: % ch.)-Primary$( 0.13) NM $ 0.01 $ 0.03 123.4 %
EPS (r: % ch.)-With Extra.$( 0.13) NM $ 0.01 $ 0.03 123.4 %
Shares (ratio: %ch.)-Primary 77.9 ( 5.6)% 83.5 83.7 7.4 %
NOTES: 1) FY2Q97 inventory write-down ($-0.08 EPS) reallocated from COGS.
2) FY2Q98 (+$0.01) net effect of bad debt reversal, fx loss and
marketing costs related to C6 mpu.
BUSINESS DESCRIPTION: Leading fast SRAM, specialty memory, and high speed
logic chip supplier with a position in RISC microcontroller/ microprocessors.
Increasingly targeting communications markets (50% of sales).
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Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the
past three years a public offering of securities for this company. B-An
employee of Lehman Brothers Inc. is a director of this company. C-Lehman
Brothers Inc. makes a market in the securities of this company. G-The Lehman
Brothers analyst who covers this company also has position in its securities. |
