lehman.com
Headline: Integrated Device Tech: On Timing Basis, Stock Downgraded To 3
Author: M. A. Gumport, CFA 1(212)526-5368, T. Berg -5276
Rating: 3
Company: IDTI,ALTR
Country: COM CUS
Industry: SEMICO
Ticker : IDTI Rank(Prev): 2-Outperform Rank(Curr): 3-Neutral
Price : $14 3/8 52wk Range: $16-9 Price Target: $17
Today's Date : 04/20/98 @ 10:10 AM
Fiscal Year : MAR
------------------------------------------------------------------------------
EPS 1997 1998 1999 2000
QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr.
1st: 0.11A 0.02A 0.02A 0.06E 0.06E 0.28E 0.28E
2nd: -0.13A@ 0.03A@ 0.03A@ 0.09E 0.09E 0.33E 0.33E
3rd: -0.55A@ 0.03A 0.03A 0.15E 0.15E 0.37E 0.37E
4th: 0.03A@ 0.03E 0.03E 0.25E 0.25E 0.32E 0.32E
------------------------------------------------------------------------------
Year:$ -0.54A@ $ 0.11E@ $ 0.11E@ $ 0.55E $ 0.55E $ 1.30E $ 1.30E
Street Est.: $ 0.11E $ 0.11E $ 0.63E $ 0.65E $ - -E $ - -E
@-Includes: FY2Q97 $-0.08 inventory write down, FY3Q97 $-0.48 restructuring,
FY4Q97 $+0.01 nonrecurring, FY2Q98 $0.01 after tax net of bad debt reversal,
foreign exchange loss and charges related to marketing of C6 mpu.
-----------------------------------------------------------------------------
Revenue (1998) : $586.0 Mil. Proj. 5yr EPS Grth : 6.0 %
Return On Equity : 1.6 % Dividend Yield : 0.0%
Shares Outstanding* : 90.0 Mil. Book*/Price to Book: $8.03; 1.79x
Mkt Capitalization* : 1293.8 Mil. P/E FY98; FY99 : 130.7x; 26.1x
Net Cash per Share* : $1.79 Convertible : Yes
Disclosure(s) : G,C,A
*Includes convertible as equity
-----------------------------------------------------------------------------
** SHORT TERM, STEPPING ASIDE. MOVING RATING DOWN TO 3. REEVALUATE AFTER
4/22 EPS RELEASE.
** VALUATION TIMING CALL: CHIP STOCKS BOUNCED LATE LAST WEEK ON REPORTS OF AN
ORDERS UPTURN IN LATE MARCH-APRIL. WE DON'T SEE IT. COMMODITY CHIP PRICES
REMAIN UNDER PRESSURE.
** IDTI's DIVERSIFICATION PROGRAM (x86s, ALTERA {ALTR-$39 7/8; NR} DROP IN
REPLACEMENT PARTS, GRAPHICS ACCELERATORS, AND TELECOM SWITCHING CHIPS) IS
RELATIVELY ADVANCED, BUT NOT STRONG ENOUGH TO SHOW GOOD EPS TRENDS IN THE
IMMEDIATE PRESENT; WE VIEW OUR NEAR TERM UPTREND FORECAST WITH SOME CAUTION.
** STOCK HAS ALREADY REBOUNDED TO NEAR OUR $17 1-YEAR TARGET; WE BELIEVE THAT
TARGET IS CONSERVATIVE BUT SEE NO REASON TO INCREASE IT AT PRESENT.
-----------------------------------------------------------------------------
CHIP STOCKS RAN UP LAST WEEK ON REPORTS OF IMPROVED ORDERS IN LATE MARCH-APRIL,
BUT WE DON'T SEE IT. Meanwhile, commodity prices remain on a steady
slide. We view our forecast of an immediate EPS uptrend with some caution.
STOCK DOWNGRADED FROM 2 TO 3; 1-YEAR TARGET OF $17 MAINTAINED; PRINCIPALLY AN
ISSUE OF TIMING. The stock price downgrade should not be confused with any
kind of judgement regarding the ultimate success of IDTI's diversification
program. To the contrary, IDTI's new product development program is among the
strongest in the industry, and we are particularly enthused by the potential
of its Clear Logic (ALTR drop in replacement parts), Centaur (x86s), and high-speed
specialty DRAM ventures. However, the impact of these programs does not
seem likely to be important enough in the next few months to make a
meaningful, positive change in EPS potential in light of ongoing soft chip
industry demand trends and pressure on commodity parts.
ONGOING NEGATIVE NEWS ON COMMODITY PRICING, THE UPCOMING SEASONAL SLOWDOWN,
PLUS THE TIMEFRAME FOR IDTI TO REPORT SUBSTANTIAL RETURNS ON ITS
DIVERSIFICATION EFFORTS MAKE US ADOPT A MORE CAUTIOUS NEAR TERM STANCE ON
VALUATION. At this stage, it seems sensible to step aside from those chip
makers whose stock prices have bounced strongly off the bottom and where
fundamentals have not yet come through.
BUSINESS DESCRIPTION: IDTI is a leading supplier of fast Static RAM used in
workstations, minicomputers, and high-end PCs and has successfully secured a
position in the RISC microcontroller/microprocessor market.
------------------------------------------------------------------------------
Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the
past three years a public offering of securities for this company. B-An
employee of Lehman Brothers Inc. is a director of this company. C-Lehman
Brothers Inc. makes a market in the securities of this company. G-The Lehman
Brothers analyst who covers this company also has position in its securities. |
