Hogler: I am not sure what you are missing, but shipments of chips are 30 to 40% lower than last year for the same month, if the average price per unit is down 30% as well, the number of wafers required would be constant. If the foot print per device went down on the average 10% during the same period, you would actually have a declining demand for wafers. If that was not enough, what the market is, at least I believe so, really afraid of, is that in the face of a stagnant demand for wafers, the capacity of making wafer has increased by some 30% over the last year (correct me anyone if this number is innacurate). Since all the large wafer suppliers have vowed to defend their turf and the total turf is smaller, like in any other commodity market, prices will be coming down. If that is not enough, now they are working at less than full capacity while carrying costs for full capacity. These are a lot of whammos for a company whose business base is quite narrow. Add all these together and you are going to see estimate cut from $4/share to $2/share, and later on to even less.
What happens to the stock if they come up with a quarter of only $.25/share earning? Analysts are going to translate this to an annual rate of $1/share, say the company's growth is over and accord it a sub par PE of 10 and you got a $10 stock. I am not saying this is what will happen, but this kind of scenario can certainly explain the behavior of the stock. What surprises me is that analyst are waking up to this scenario only know, and here we are, I believe, in our 9th month of BB under 1. I wonder what these guys are smoking.
Zeev |
