Katherine, re: my earlier post
Thank you for your response. It appears we have a thread where multiple people with different perspectives are able to make substantive contributions.
With respect to your response to my earlier post:
1. I agree that PLAB and DPMI are more exposed to Asia than MASK and thus have suffered disproportionately. To the extent a rebound in Asia benefits PLAB and DPMI disproportionately, that is to their advantage. It does nothing, however, to affect my analysis that MASK is significantly undervalued. Remember, PLAB and DPMI are already trading at twice the valuation of MASK and the Asian rebound that would justify such valuations is hard to find.
2. I find it hard to believe, as you say, that "foundries use orders of magnitude more masks than dedicated fabs." I think the reality is that the Asian foundries use more masks, PLAB and DPMI are more exposed than MASK to these customers, and that the slowdown in Asia is the reason why PLAB and DPMI are showing flat to declining revenues and MASK is showing solid revenue increases. It is hard to conceive of a rebound in Asia that is not part of a generalized industry rebound. Thus, MASK benefits here as well, though perhaps proportionately less than PLAB and DPMI. Again, MASK is undervalued.
3. With respect to the details of .25, .18, and various lasers, I have to defer to you, dlc, and the other more technical types. Two points are important, however. First, the MASK financials show large recent investments in the technology for .25, OPC, phase-shift, etc. Second, even though Intel is claiming 60% at .25 and below by the end of 1999, Intel is a special case. It has a huge incentive to shrink the size of its CPU chips. For the bulk of the industry, going from say, .35 to .25 or, especially, from .25 to .18 is not an economically or financially correct move in the present environment. The reasons for this slowdown are the same as the reasons for the slowdown in the transition to 300mm wafers, for example. Right now, and probably for some time, capacity utilization, cash flow from operations, and amortization of existing capacity are much bigger issues than acquisition of next-generation technology for most chip manufacturers. Note: I hope I used the technical terms for chips and fabs correctly. Trust me on the economics and finance.
Finally, it's important to reiterate that MASK is not only undervalued relative to PLAB and DPMI, it's undervalued relative to any standard measure, e.g., price/earnings, price/sales, price/book, return on equity, etc. The fact that MASK has posted consistent results for the entire industry downturn and has posted revenue increases for seven consecutive quarters goes far beyond the suggestion that MASK's relative good fortune is due to low exposure to Asia. MASK's good fortune (except for the stock price) looks to me like good management, good products, and good marketing.
Since this is my third lengthy post on the subject (see the MASK thread for the other), I'd like to stop writing for a minute and ask a question of the readers: Is anyone aware of any other tech companies with a return on equity of 18%, a P/E of 8, and more than a few quarters of sequential revenue growth (or some similar combination of these factors)? I'd be happy to evaluate it on a strictly financial and economic basis (I am an economist) and post the results.
Thanks, Katherine. |
