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Technology Stocks : Dupont Photomasks (DPMI)
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To: John Bloxom who wrote (73)1/24/1998 10:17:00 AM
From: Tina McKinley  Read Replies (1) of 955
 
Not a shareholder of DPMI, but I have a friend that is. Just doing a little looking around and found this on the Motley Fool Message board - thought it might be of interest here.

Subject: Warning Today
Author: TMF_Bogey Date: 12/18/97 7:03:36 PM (ET)

DuPont Photomasks announced today that they see much weaker than expected earnings for the second quarter as a result of the devaluation of the Korean Won. For those who are confused about all this currency devaluation stuff, here's the deal. DuPont signs a contract with Korean DRAM manufacturers and says "We'll accept 1000 Won for our product in the next two months (they book sales ahead of delivery). Then, when it comes time to get paid, the Korean manufacturer says "Here's your 1000 Won" only now it's worth significantly less than it was before. The translation back into US dollars is where DuPont gets hurt because the Korean won isn't as valuable as it was before.

Generally, currency problems are a result of a company's (DuPont in this case) inability to be properly hedged against a decline in the won and are usually short term in nature. In fact, it often has the opposite effect on the other end. DuPont is now making deals based on current prices and when the Won goes back up (if it goes back up), DuPont will do better than expected due to currency gains.

Most importantly, it means that there is nothing inherently wrong with DuPont's business and probably short-term in nature. Is this an buying opportunity? We'll see.

Best,

Bogey
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