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Technology Stocks : SILICON STORAGE SSTI Flash Mem

SSTI 8.310

+1.2%

Nov 11 3:59 PM EST

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To: Naveen Kumar who wrote (148)	3/15/1998 6:03:00 PM
From: Smilodon	Read Replies (1) of 1881

Real reason for the decline is oversupply of capacity. While SST sells primarily into Taiwan, this has not really caused the lack of profitability. Taiwan is not under the same duress as Korea and Thailand. There is plenty of capital available and most of the chips bought are for assembly into boards for US manufacturers. In Q4, the Taiwanese motherboard manufacturers did reduce inventory in the channel and this caused a short-term problem. However, the real reason for SST's decline is the semiconductor cycle. There is still overcapacity and prices are falling faster than costs. It looked liked the industry was bouncing back at the end of 97, but it was a small bounce. Flash pricing fell dramatically once again. Yet SST went up to $8 very quickly as investors tried to participate in the upswing of the cycle. Recent reports show that flash pricing seems to be returning to its normal pattern of decline. And manufacturers are finally slowing down their capital spending. If capacity once more falls in line with demand, and with the current low levels of semiconductor inventories, we could see a dramatic rise in SST's profitability. The company has been pointing to 2h of 98 as a good period for the company. They should start getting royalties from some of their lisencing deals and will ramp up sales for the palm pilot clone. This of course depends on PC unit demand remaining healthy. I think now is a good time to buy because Q1 is normally their slow quarter due to chinese new year, so no one is looking to buy right now. The company is in its quiet period so it cannot support the stock price with buybacks. With over $2 per share in cash and a business that has generated more than $1 per share of earnings at a better part of the semiconductor cycle, it seems to have a good risk/reward tradeoff. But, keep in mind there is certainly risk. They have been sued by both Atmel and Intel for patent infringement and are subject to the PC cycle, as well as the semiconductor cycle. I think there is great potential for this stock. But that is just my humble opinion.

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