Carl: You know that I am following quite closely WFR and FERO (on which I am currently quite negative until at least the middle of the year). In a recent post to Doug on WFR I stated that another small bounce in WFR may occur before the middle of Feb., and I suggested he watches MU for a rebound and possible challenge of 36. If that fails, this will be, in my opinion, the signal for a resumption in WFR's decline and this will be followed by the semi cap. As you stated, the DRAM business is the driving engine of the SEMI industry. The amount of silicon real estate consumed by DRAM per dollar of sale could be 5 times (and in some cases 10 times) as high as in the rest of the industry, yet DRAM account for about 50% of all semi sales, and a larger percentage of total silicon and thus equipment required to produce the drams.
As for PMAT, just to be at the sales level of the combined companies last year, they will have to increase sales by 50% from current levels, I do not think this is in the cards. I am sure Robert H. must have developed a model of PMAT's future earning to have his "comments stand", and it would be interesting if he would let us in on this model.
You think that the bad news is already rfelected in PMAT price at 11 to 12, and I disagree with you. They have missed the last quarter badly and the next quarter, is implied by them to be no better and possibly worse. The difference is that now they have to pay interest on a relatively big chunk of debentures (close to $85 MM) with negative cash flow two quarters running, this could be the precursor of a down ward spiral.
Zeev |
