CC Notes:
1) Have implemented 0.25 micron production lines, and are moving to 0.2 in some areas.
2) Next quarter is expected to be weak for two different reasons: First, their consumer goods area is seasonal as is the wireless handset market (which is a large part of the communications area.). Second, many of their customers are working off inventory and reducing production (a double whammy) because they are uncertain what the effect of the SEA will be.
3) Communications area revenues are up about 50% over last year, and now make up nearly 60% of all revenues.
4) I got the impression that they have been adding substantially to their customer base. They mentioned multiple design wins and new customers, although they didn't actually talk about the size of the wins (eg they now have 3 CDMA design wins.).
5) The computers area was not discussed a great deal except to say that it is expected to be stable next year.
6) Inre consumer electronics - Sega Arcade demand is up substantially both sequentially and compare to year ago period. In addition, STB sales are up substantially from previous quarter, and they expect to start shipments to JSkyB next quarter. Finally, they said that they have won several contracts in Germany for Cable STBs.
7) 15% of production is done via foundries. The reason is to keep the Austin facilities at capacity, and yet still be able to produce the needed amount during the peak seasons.
8) Even with all of the concern, Q1 revenues are still expected to be somewhat greater than last year (without COMPASS). And growth is expected to pick up substantially in Q3 and Q4. There was no discussion about Q2. Overall, growth is expected to be greater than the growth last year (6.5% without COMPASS). They said 7-10%. But they also said that they expect the computer area to be flat (and ramp up in '99), while consumer area is slightly up, and, in response to a question, they said they expect the communications area to be up about another 20%. (Note: When you add these numbers up, it makes for something closer to 15% than 7-10%.)
9) Margins. They expect gross margins to be only slightly above the current level for Q1, but they also expect the GM to start growing again later in the year. (To what level they didn't say.) And they expect Q1 operating expenses to be about constant with the current levels.)
10) Much of the growth this year in the communications area was in GSM phones (they said VLSI is in all Ericsson GSM phones), and most of that growth occurred in Europe, not Asia.
11) The agreement with the Malaysian fab company is not scheduled to start production until well after '98, so, although they expect no hiccups in the agreement, even if there are some it shouldn't affect their production.
12) Someone asked them to name their 10 biggest customers, and although I only caught the first three, I still thought it was pretty interesting. Ericsson, Matsushita, and 3Com.
Clark
PS This CC was similar to the year-ago CC, and the stock price did much the same thing. The analysts have a shorter time frame than most of us, and since the expected earnings the next quarter or two aren't spectacular, they justifiably say hold. But, when things ramp up, expect some big jumps in analyst reco's. |
