A bunch of thoughts for all-
I'm not worried about IMP at all. They have limited financial resources, and they are puny compared with SMTC. I don't think we're being too optimistic about SMTC. After all, an extremely important asset is not listed on SMTC's balance sheet: Intellectual capital, specifically the design engineers that SMTC has hired. IMP may have a great fab, but if they don't have the people, they don't get the business.
The only reason that I expect SMTC to outperform THQI in 1998 is that THQI has typically not received a high P/E. I think it's perfectly reasonable for THQI to reach $50 in 1998 (P/E of 30). If this happens, THQI will have returned 120%, just like SMTC. The reason that THQI is my favorite stock is that there is tremendous upside potential, relative to SMTC (as if 120% isn't tremendous enough). My 1998 estimate for THQI is $1.65, but the company could make $2.00. If you apply a trailing P/E of 40 (not high for a company growing at more than 100% for nearly 3 years), a valuation closer to its peers', you have an $80 stock in a year or so. SMTC isn't growing as fast as THQI, so the only thing holding THQI back is its relatively low multiple.
Thanks, Jeff, for all the links. Or should I say "Danke Shoen?" Your analysis and comments have been excellent.
Jerry- I'm not worried about the drop in oil prices, because the division manager & VP at LUFK isn't worried.
I think that any M&A activity involving SMTC will be a buyout of SMTC by a larger company. For example, NSM might be interested in SMTC, as NSM becomes more of a one-stop shop. It makes analog devices, processors, and other specialty devices that would be benefitted by the inclusion of SMTC. It really depends upon the direction of consolidation in this industry. If companies want to become one-stop shops, a la Cisco Systems, they will acquire smaller companies in different areas of semiconductor manufacturing. This may be more important if/when the "system on a chip" concept becomes a real issue. I could see IBM buying AMD and either ADI or MXIM. INTC may buy LLTC, MXIM or MCRL. NSM may buy SMTC or MCRL. Ultimately, we may see TXN and some other specialty non-analog chip makers consolidate. I suspect the industry will look very different in 5 years. The networking industry is a good model for what may happen in semiconductors and chip-equip. Of course, if this happens, it's likely that INTC will remain the leader, unless they really screw up, like IBM in the 80s.
Todd |
