Mark and Doug,
Here are my bullet comments from the INVX CC. As always I take no responsibility for anything I report:) By the way Mark, I shouldn't have addressed this to you since you are a traitor that went over to the HTCH camp:) Anyway, these notes are in order that I took them during the CC. If anyone wants to add anything or correct any mistakes on my part please do so.
* .13 EPS for qtr, and $1.05 for the year. They were one of the few hdd companies that remained profitable during this last year (all qtrs).
* Sales picked up in Sept from earlier in the qtr and they continue to be firm as of today's CC.
* Visibility continues to be poor.
* FY99 is projected to be the mirror of FY99 in terms of revenue and earnings (ie there will be an increase in revenue and earnings each qtr-over previous qtr). This sounded very positive to me. No figures were given by Haley.
* Their Litchfield facility increased in terms of percent of overall revenue this qtr. (25%). I believe they said 1st qtr FY99 will provide 45% of the total revenue for INVX.
* 4 distinct programs for flip packaging in the works (see INVX press release).
* Flip chips / chip packaging will cause a “significant impact” in revenues in 3rd or 4th qtr FY99. Don't know if they meant in terms of % of total sales or increase in total revenue.
* INVX isn't interested in making suspensions for hdd.
* I believe they were talking about flex circuits (possible flip chips), but 3M and RDRT were some of the main competitors. Neither of these companies were showing any interest in production equipment that produced flex circuits (I believe for the suspensions).
· RE: Pico applications-each design is different in qualification and thus I believe the time for qualification is different due to the design changes. Presents a challenge. 3rd and 4th qtr FY99 will see a significant ramp-up of FSA.
· Lead wires- ave. 4 million/week in 4th qtr vs 5 million in the 3rd qtr of FY98. In September, the ave went back up to around 5 million.
· HIF will increase from 1 million to 1.5/week during the 1st qtr FY99.
· ASP was very stable. Around .30 for HIF and .20 for the wires.
· Outside of SEG, companies want HIF attached to the suspension (ie FSA).
· Currently 2 customers for FSA. Quals in FY99 and production in 3/4th qtr FY99.
· Chip packaging (CP)-potential is “huge” and their multiple customers interested. The players / customers are big. They spoke of Micro PBGA (?) and two other items. I am unsure of what they meant.
· The applications for CP are just beginning. IE large potential for multiple applications.
· INVX said something concerning their competitors (RE: CP) have a narrow web in terms of tolerances or capabilities vs. a wide web for INVX.
· Bridge Flex - They estimate 2-3 million sold for this coming qtr (for the whole qtr, not per week). 2nd and 3rd qtr could see a tripling or quadrupling from the 1st qtr FY99. ASP is same as lead wire.
· INVX has a lot of plans in terms of either a new facility or possible acquisition for the $15 million they now have in cash.
· INVX is now only at 20% capacity for CP. They expect this industry to grow very rapidly. In fact they are making plans to possibly build a new facility or at least find a new location in 6-9 months. Construction would probably begin in early FY2000 if needed. They have plenty of capacity for right now.
· They see stability in the number of wires sold thru the 2nd qtr but then see a tapering off in the 3rd qtr due to I believe HIF/FSA.
· Good feedback on FSA from customers in this last qtr vs the 3rd qtr of FY98. Production volume was also better this last qtr.
· CAP EX for 98-$13 mill.
· Depreciation/Amortization for 98 - $7 million.
· A lot of productions don't have the tail and yet most companies want the tail (ie bridge flex-FSA, mounting to suspension to). Customers believe this is the solution.
· INVX believes from the HTCH CC that TSA sells about 50% without the tail and 50% with the tail.
· HIF profit margins holding stable, yields continue to improve, and product is beginning to mature.
· INVX expects to continue to grow in FY99, FY2000, and beyond due to chip packaging and FSA.
· Pricing Outlook for FSA, they see significant pricing performance. They mentioned 20%, but I can't recall exactly what the 20% referred to.
· There is a 6-9 month lag time (production ramp) to get FSA product to market (I guess once quals start for a new program). They currently have the capacity to fulfill demand.
· INVX's biggest nightmare is being blind sided by new technology, but they don't foresee this at this time. The most important mission is to EXECUTE.
· Inventory levels have thinned out nicely at all levels in the hdd industry.
· There may have been a misunderstanding from a CC a few qtrs ago. INVX had stated previously that they would have the capacity to ship FSA in the 4th qtr. INVX did not mean to infer that this meant shipments of FSA.
· INVS has looked at 3 companies to acquire over this last year. None meant there standards (don't know what the standards are, but IMHO it could mean the balance sheet and also the product produced - ie did this potential company meet INVX's strategies for expansion in the flex circuit / flip chip arena.
· Labor market is very tight in MN. The new facility is extremely automated and their capacity / revenue has double (Litchfield). IMO this sounds good as this would decrease the expenses for additional employees. Labor intensive production will remain in Asia as their is “unlimited” supply.
· The location for the new facility would most likely be placed where the company can find the best tech people. I believe they said that they would want their new facility producing in FY2000 (Don't know if this means early, mid, or late FY2000). If the capacity is needed for CP, they may start building next summer. I think it only took INVX about 3-4 months to build their last facility.
· CAP EX for FY99 will be approximately $10-15. This would not include the new facility. Cost for new facility would be about the same as there last facility ($20 million).
· Foreign currency was a problem (ie Yen) earlier this year for the sale of the lead wires. INVX is currently upbeat about their margins for the upcoming year.
· There are very broad applications for CP. Cell phones, digital cameras, computers, etc. CP would be used in/with/attached to the integrated circuits. INVX doesn't even know the full ramifications for CP(numerous types of application that would utilize CP).
· INVX said they had more than 50% of the market for HIF products. I am not sure what they meant. They must be excluding TSA in this market.
· INVX doesn't want to give out the pricing for their FSA due to competitors. They did say pricing will be based more on their competitors cost than production costs (This sounded positive to me).
· No stock buyback at this time. Want to use money for expansion.
· INVX will compete with US and Asian companies in the CP business. I screwed up some of these companies names, but some that were mentioned were 3M, Shindo (?), and the Chebols (I believe referring to the Koreans). INVX believes they will be more efficient than there competitors due to INVX's superior equipment.
· Reiterated the opportunities in the CP business. They spoke a little about double sided CP. I believe they said there are no customers yet for double side CP (vs single sided)???? It would take about 12-18 months and this is plenty of time for any prospective customer.
· FSA has had high yields for the initial production. Three addition pieces of equipment are due in Dec to increase the capacity. Early CY99, this equipment will be in place to produce FSA. I believe the 3 pieces may have been referring to 3 additional “lines” of production. I can't remember what they now have in place in terms of equipment for FSA.
· They ended up the conversation with they expect a mirror effect in terms of revenues and earnings throughout this next year (ie sequential quarterly growth), FY98 was a transitional year, and in FY2000 CP/flip chips will be the dominant revenue producer for INVX (ie over 50%).
This was the most positive CC since last summer. Barring a market meltdown, this qtr or next may be an ideal time to start buying INVX again (IMHO).
Take care,
Kurt
PS Mark, while you are sunning yourself down-under on the beach tomorrow, I will listen in on the GMGC CC. I will post what I hear.
PSS Gerald, thanks for the link on this mornings article.
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