Phoenix Technologies (PTEC) Message Board

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Technology Stocks : Phoenix Technologies (PTEC)

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To: Fred Fahmy who wrote (2824)	10/22/1998 9:28:00 PM
From: Mark Brophy	Read Replies (2) of 3624

The outlook is more complicated. It's true that the over-$1000 BIOS business won't grow in the next year. But, Merced will be released the year after and the unit royalty ($3-10) will be substantially higher than currently ($1.00-1.75). I'm happy to see that Intel's blank check has been discarded and they will be treated like any other customer. It should be much easier in the future to align expenses with revenues. The under-$1000 BIOS business is doing well and was 21% of revenue and a disproportionate share of profits. Margins in that area are the highest in the company and will increase as features from the Phoenix BIOS are migrated to the Award BIOS. Management may be only "cautiously" optimistic about an Asian recovery, but I'm more realistic and expect a robust increase in the Dec. quarter. Award went through the roof last year and I expect history to repeat itself. It was a refreshing display of humility for Jack Kay to admit that they acquired Award because of their own failure to grow the under-$1000 BIOS market. The IP and Pico businesses are growing fast and will be 30% of revenue next year. So, 50% of the company will be in prime businesses. VChips grew 110% this quarter over the previous year and I expect Sand is performing similarly well. I was especially impressed by the 1394 contract they signed with a set-top box vendor. LSI Logic has been traditionally strong in that area and their new Symbios acquisition includes a 1394 core, so it's an impressive win for Phoenix. If they hit their targets of 14% revenue growth and 17% operating margins, revenue will be $140m and earnings $0.63/share. The book value is $4.77, so the forward P/E after subtracting book value is 4. How can you even considering selling at that price, especially when the CEO and CFO bought shares recently at 30% higher than the current price?

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