Details of latest conversation with Phil Barton......
I just had another good conversation with Phil Barton at Seeq IR.
As usual, the following comes with the usual health warnings about
this being my interpretation of what I think he said !
Q. How are sales going ?
The hope is to achieve a sales revenue growth this year of about 30%
over last year. The first quarter numbers were in-line with this,
and whilst lower sequentially, were the strongest first quarter for
a long while. There is still some uncertainty about the current quarter
(Jan-Mar), due to inventory turns at major customers, but
the next two quarters are looking good. The first quarter was
encouraging, and the book to bill was above 1.1 (i.e. at least
1.1 x 7,552 was taken in new orders in Q1).
Q. How are the new products doing ?
The greatest opportunity is for the 100TX PHY, which is technically a
great product. The problem is that the product acceptance cycle has
been longer than typical, because this item was late to market. In
other words, it's had some catching up to do, and has had to go through
greater scrutiny at potential customers because it can be compared
with existing products (some of which may already be designed-in).
However, the product is good, and the acceptances are finally
happening. This item is likely to make a good contribution to the
Q3 and Q4 numbers.
Q. How are the 1G products doing ?
Well, this market is very small still, but the product is being used
or evaluated by a large number of small players. Many of these are
start-ups, with bold ambitions. The very large players may not be
interested in the part because they are ploughing money internally
into their own product developments. However, there is always the
probability that the larger players will find the technical challenges
too great, and may buy-up one of the smaller companies with an
functional product so they can get to market. All things considered,
the initial reaction to the 1G products are positive, with good design
penetration so far into what is still a very small market.
Q. What about other new products ?
There are a number of other new products in the pipeline, with various
sampling milestones due in the next two quarters.
Q. What's the current situation regarding analyst coverage ?
Brean Murray presently remain the only official analyst covering the
company. However, analyst interest is generally increasing to the
extent that many of the companies that Seeq have been wooing now
contact the company periodically. It is probably still a little
early to bring any of the large players on-board - the company probably
needs a slightly higher stock price and a few more quarters of growth
- but it is difficult to say that one or more of the players might
not initiate coverage before the end of the year.
Interestingly, whilst the stock price is still slightly below the
radar screens for the analysts and institutional investors, it would
seem that the institutional stock holding is increasing slightly,
and for December might be as high as 20% (net of Atmel who hold a
further 8%).
Q. What are the current earnings estimations ?
B.M. currently have a target of 30c for the year, which is a very old
estimate. Some of the other analysts that Seeq have talked to have
estimates in the low 20s - e.g. 20 - 25c.
Q. Which of the estimates does the company feel most comfortable
with ?
Difficult to be precise (for a range of reasons) but the more recent
assessments are probably most realistic.
Q. Would there be much possible upside on an estimate of 22c (say) ?
Yes, there could be. It's very difficult to be precise, due to a
number of reasons. However, margins should remain good, and the
revenue growth discussed earlier is realistic.
Q. Will the company be using tax credits to "inflate" earnings ?
Unfortunately, yes, but this is a situation being encouraged by the
SEC. Whilst the earnings situation was still unclear, i.e. profits
were intermittent, the SEC was comfortable with the company continuing
to defer the consumption of the accumulated tax credits. However, now
that the company is more consistently profitable, the SEC wants us to
start using them. This wouldn't be the first choice of the company
for a number of reasons including the fact that it distorts the
market's earnings perceptions. The plan therefore is to now continue
to use some tax credits every year, hopefully in a more consistent
way, so that the actual earnings figures will be less distorted.
And then we did the usual bit - i.e. my usual "you aren't doing enough
press releases, but the web site's getting better" stuff, blah, blah.
The only other thing that came up was the recent IBD article about
the networking market, which mentioned Seeq and had quotes from
Dr Salsbury. I *think* someone posted the article a bit earlier.
It seems that Seeq are quite proud of it.......
Anyway, Seeq still seem to be on track, and the next 12 months could
be kind of interesting.
Mark |
