Slob,
OPTi held a conference call on 11/26/97. I took some notes
Dave Zacarias (CFO) did most of the talking. Jerry Chang spoke a few times.
After reading the press release but before any questions were taken, Zacarias stated that a stock buy-back program would be addressed at the next board meeting. Didn't say there would be a buy back, just that the issue would be addressed at the board meeting in December
Net Media Group is the audio group. Opti is out of the audio business, with the exception of selling 3M in ISA 931 inventory. Expect this inventory to be sold in next 3-6 months.
This is a done deal. OPTi will have about 70M in cash. Zacarias had checked with the bank to see if the money had been deposited by conference call time. No taxes to be paid on sale. Operating loss for this quarter will be less than September. This is reported as a non-operating gain.
Back end services with CREAF are layout, testing, etc to finalize a product. Many companies spend a lot on R&D, but don't have much capability in this area. OPTi has the technology and personnel to do this work. Deal with CREAF is minimal, in the low 7 figures next year. Terms of the CREAF purchase of the USB 861 part are defined but sale is not certain. No amount given.
Warrants are for 5 years and can not be exercised in the first year. OPTi believes this shows CREAF will be interested in OPTi's fate and may help in securing future business.
Net Media was about 25% of the previous 9 months revenue. What percentage did Net Media contribute to the loss? Answered not as percentage but that the break even for the core logic group is sub 20M, while with net media it would be 20-21M. Better margins on core logic.
UMC fire will cause an operational delay of about a year. The positive side, new fab will be .25. Better technology in new fab as old was .35. Capacity is not an issue with the fire. Insurance money does not flow to OPTi but is used to build new fab.
Tripath sale has the potential to close Q1 but don't hold them to it. Amount will be closer to $1.5/share than $1.0/share.
OPTi's core business is mobile core logic chipsets. Loss this quarter will be less than September. In 1998 with reasonable mobile core logic business OPTi is not that far away from making money.
Insider buying and selling? With options, Chang owns 10% of company. No insider buying or selling .
It didn't sound as if OPTi was perusing any technology purchase with its cash.
Stephen Dukker left under good terms and is still a director.
Dave Zacarias said many times that OPTi's intent was to increase shareholders value. This in the face of withering criticism about the present shareholder value. He states SEC rules prevent him from talking about "tons of things" in the works. But of course don't take that to mean that anything is in the works!
Jerry Chang only spoke a few of times. However, it is interesting that he mentioned consumer electronics and HDTV several times. Something about R&D and HDTV being shipped next year. Mentioned back end services and no margins in sub 1000 PC.
Thoughts:
OPTi may be in process of exiting the PC chipset semiconductor business. There may be decent margins in the mobile chipsets today, but it's not going to last. When will the sub 1000 PC be the sub 1000 laptop? After being crushed in the desktop and audio chipset business, maybe it's apparent that the mobile business is for bigger players. Any thoughts as to whom might be interested? How much is it worth?
Zacarias answer to the "What percentage did Net Media contribute to the loss?" was interesting. If he just sold the division, he knows costs to the penny. He avoided the simple "10%" answer and substituted the sub 20 million scenario. Maybe FireStar Plus design wins put OPTi on the plus side in Q1?
Chang's consumer electronics and HDTV comments, along with the indication that OPTi had been spending R&D in this area, gives an indication as to where the company is headed. Any ideas?
OPTi's is trying to build the back end business, but this didn't seem urgent.
OPTi closed at 6 3/8 up 5/8 on 11/25. With about $5.30/share in cash, it seems both cheap and safe.
The above notes and analysis are provided with the assistance of an adult malt beverage of the Bud Light variety. BUYER BEWARE!
Happy Thanksgiving
Steve |
