Michael,
you are proposing a gap argument that Leo Francis already proposed. i ask you to present proof that S3 will gap away from a fundamentally sound price or has in the past.
1) It is trading above it's liquidation value. Unless a business is near failure, this is a prime buying opportunity.
if you think this value approach is valid, buy GM, F, C: GM trades at 68 ('97 eps $7.80, dividend $2.00 3%, death value around $84-$95)
others have worse values. S3 need not apply for membership.
The fab is an ongoing part of their business and should be
considered just as any other revenue/earnings
you are mixing two issues: 1) addition of minority owned income/loss and 2)valuation of the USC investment at market value. If USC costs become uncompetitive, it will lose money. TSMC and UMC (USC parent) often bid for the same business. Overcapacity concerns are driving current Pac Rim tech sell off. Valuation AND income are NOT certain going past next 3 months.
I'm holding long and buying more if I can at the 8 1/2 range.
i'm greedier than you, waiting for $7 then $4. At $4 the value will match GM's. nothing wrong buying into that. At 8.5, i see a risk of 50% downfall on a new position.
BUT if you buy based on book value, you would have gotten clocked with Media Vision, Acclaim Entertainment (Wall Street Journals WORST 5 yr performer) and other tech companies who bled cash and decreased $5-$8 book value to $0.00 and NEGATIVE by NOT KEEPING UP with the pace of innovation.
) It is seen 17+ twice in the last year and will see it again. When? Who knows. TIME VALUE OF MONEY is an important concept if you are a day trader. $17 in 5 years is worthless. My forecast is next September. If GX4 is an exponential product then $20's by next December (if not then $10 again). if GX5 (for lact of a better description) is again an exponential product, then $35 in sept. '99 (if not, then $7 again.)
Our uncertainty in S3's outlook (pro and con) is based upon hidden values within S3 R&D.
4) They are still the market leader. They will continue to be although new products are lagging behind schedule.
the companies who lead their markets without leading edge products (IOM, MSFT, GM, PG, LUV) have some sort of proprietary edge. This strategic barrier prevents competitors from outdeveloping them (although in GM's case, their brand loyalty has been disappearing).
Market leader does not mean unit sales leader. market leader means being able to CONTROL industry prices. INTEL is a market leader. PG is. AMAT. UAL. When they move prices, people listen.
If S3 moves prices, it affects the low end only, not the high end. They are half a market leader. (400 lb gorilla not 800lb.)
hmmm...otherwise, i agree with you.
:)
BL
ps, i know i'm quibbling with your statements. go ahead and attack back. |
