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Technology Stocks : Power Integrations (POWI)
POWI 36.14-0.6%Dec 16 3:59 PM EST
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To: Jeff Bond who wrote (49)7/3/1998 4:23:00 PM
From: Jeff Lawlor  Read Replies (1) of 449
 
Jeff B.,

To your question on the customers, the last 10Q indicates that 2 "direct" customers accounted for 19% and 14% of Q1 revenue. However, there were no "end" customers which accounted for 10% or more of Q1 revenue. This indicates that these "direct" customers are distributors or merchant power supply manufacturers. I agree with you on the Taiwanese theory as the 2nd customer was not a large customer in 1997 but in Q1 suddenly represented 14% of revenue. This matches closely with the large increase in sales to Taiwan.

Also, from the last 10K, Motorola is POWI's largest end user. However, most sales to Motorola occur through distributors and merchant power supply manufacturers. POWI estimates that 20% of their sales go to Motorola either directly or indirectly.

POWI has excellent financials and its valuation is low compared to others in the industry. It seems like an excellent buy at these levels, however, I believe there will be continuous downside pressure on the stock as distribution by VC funds is expected. According to the 10K, 7MM shares became available to be sold on 6/12 as agreements expired. This has me a bit concerned. I think Thursday was indicative of what we may see over the next few weeks - high volume to the downside after a rise in stock price. Any lift in price over the next few weeks will probably be offset by a subsequent drop as these VC funds try to unload shares. Hopefully, it will just trade sideways over the next 2 weeks or so. Then results from Q2 will indicate whether it will resume an uptrend or drop further.

Jeff L.
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