Applied Micro Circuits Corp (AMCC) Message Board

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Technology Stocks : Applied Micro Circuits Corp (AMCC)

AMCC 8.450

0.0%

Feb 3 4:00 PM EST

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To: froche who wrote (106)	12/14/1998 7:37:00 PM
From: MoonBrother	Read Replies (1) of 1805

Analyst David Wong's Complete Comments on AMCC - not bad at all ---------------------------------------------------------------- 07:16am EST 11-Dec-98 Needham & Co. (David Wong (212) 705 0314) AMCC Reducing Rating to Hold on Valuation Equity Research Morning Note David Wong (212) 705-0314 December 11, 1998 dwong@needhamco.com Ryl Ashley (212) 705-0406 Applied Micro Circuits Corp. (AMCC/OTC) Reducing Rating To Hold On Valuation Price (12/10/98): $39.38 Shares Outstanding (MM): 23.2 52 Week Range: $39.50 - $9/62 Market Cap. (MM): $913.5 Recommendation: Hold Average Daily Volume (000): 419 3/98A* 3/99E 3/00E 3/01E Was Is Was Is Was Is Revenue (MM) $76.6 $103.3 $123.3 Op. Margin 19.3% 26.4% 28.5% EPS: 1Q $0.16 $0.17A $0.23 $0.27 EPS: 2Q 0.16 0.20A 0.23 0.28 EPS: 3Q 0.20 0.21E 0.24 0.30 EPS: 4Q 0.23 0.22E 0.26 EPS: Year $0.75 $0.79 $0.96 P/E Ratio 53.0x 50.3x 41.4x FY98 EPS was taxed at a reduced average rate of about 2.6% Investment Opinion We are reducing our 6 to 12 month investment rating on AMCC from a Buy to a Hold for valuation reasons. The stock is currently trading at 36x our calendar year 2000 EPS estimate of $1.10 and 43x our 1999 EPS estimate of $0.92. Our projected 1998 to 2000 revenue growth rate is 24% per year, though we are expecting a much higher, 48% per year growth rate in AMCC's communications products. We think that AMCC's business is fundamentally very sound: We believe that AMCC is on track to meet or exceed our December 1998 quarter estimates of $26.5 million in revenues are $0.21 EPS. * We think that visibility for AMCC over the next several quarters is good because of the $41.6 million backlog and the large order of more than $19 million for military products from Raytheon that was booked in the June 1998 and September 1998 quarters. * We think that downside risk from the relatively weak ATE (chips for chip testing) business is small because we have already built into our model low expectations of less that $2 million from ATE chip sales in the current (December 1998) and next (March 1999) quarters. * We believe that AMCC is well positioned in some of the faster growing areas of the communications chip space, including physical layer chips for OC-12, OC-48 optical fiber systems, Gigabit Ethernet systems and Fibre Channel systems. Applied Micro Circuits Corporation sells semiconductor chips to the communications, semiconductor test and computer industry. The communications sector provides the most rapidly growing of the company's revenue streams, currently accounting for about 50% of all revenues. The company has established itself as a vendor of transceiver chips for optical fiber based telecommunications systems (SONET) and is extending its reach into the high performance local area network (Ethernet LAN) space. AMCC's product development efforts are focused on the design and manufacturing of fast physical layer (PHY) and physical media dependent (PMD) devices needed to drive communications signals down lines. The company differentiates itself with fast silicon bipolar and BiCMOS semiconductor technologies which it manufactures at low cost in its own fabs, while outsourcing to foundries the manufacturing of the chips it has designed using the more commonly available CMOS technology.

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