To Van and All
We too (the undersigned and my partner) had separate conversatoins with the new CFO. Our feeling is that Walt Ameral (sp?) is a pretty straight shooter, and willing to answer any questions posed.
Cash is still at the $100,000,000 level, and there is an additional $75,000,000 line of credit fully available.
They are not chewing up cash either here or at the Fab(s). In fact, a worst case scenario at the Fabs is a $15,000,000 annual cash outlay. Given that they have 23.75% of the profits as their share of same, and that the fab is currently at near capacity due to a fire in another Asian fab (work shifted to S3 and partner fab) there is a chance for income rather than outlay.
A major goal in for the near term is to reduce receivables from about 90, and in some cases 120 days to 60 days. Since inventories are already high, and production is lower than previously, Mr. Ameral suggested that he will be accumulationg cash rather than spending it. When I commented that I was glad to hear that bankruptcy did not seem to be an option, he stated emphatically that S3 would be here for a long time!
How did they miss the boat on product cycles? They did, no excuses. They wanted to be first with a terrific AGP bus, and miscalculated the product development cycle and frankly overthought it. In retrospect it was a lot simpler to do than anticipated, but by the time that realization occured, it was too late to do much about it.
I asked if the engineers who had developed their preciously cutting edge products were still employed. They are. They are working on next generation procucts -- the generation after GX2 which is shipping.
Design wins are great but are great only in context. If a design win with a Toshiba product occurs and the Toshiba product is a low volume $6000 portable, it is not a big deal. An order from Compaq or Dell (a good customer) is a hell of a lot more important. BTW, not everyone is happy with n'Vidia. Not because they do not have a great product, but because they cannot produce enough of them. Fickle (my words) box makers are not going to wait.
S3 is insured against potential damages from the CRUS law suit. Thus it is not a big deal, unless an award of silly proportioins is made. Not likely.
Why not buy back stock below $5.00? S3 is not a large enough company to do that. I suggested that a $20,000,000 buy back would have been of great psychological, if not financial importance. He did not disagree.
I suggested that he will get more calls. I told him that I intended to post the notes that I had taken on investor chat groups. S3 has hired 2 more people to handle calls. Sandy has been retained as a consultant -- I would think in this area.
Prior to making the call, I doubled my position in S3. This was based upon my partner's conversation with S3. I will probably buy more between $5.00 and $6.50.
That's all folks.
Regards to all
Jerry |
