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Technology Stocks : Vicor Corp.

VICR 89.65

-0.4%

9:30 AM EDT

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To: John B. Dillon who wrote (77)	2/7/1999 1:11:00 PM
From: Alan A. Hicks	Read Replies (3) of 118

The tone of Vicor's Q4 conference call last week was much more positive than the Q3 conference call. 2nd Generation product orders were strong growing 30 percent over Q3. Versus last year 2nd generation shipments were up 201 %, unit production up 374%, and orders up 97%. Yields improved to 77% versus 71-72% last quarter. While the overall book-bill ratio finished the quarter at .97, management said orders were strong in January and the book-bill ratio was expected to be substantially above 1.0 this quarter. Because of strong demand for 2nd generation products, management said they are taking steps to increase second shift production of 2nd generation products. They feel 2nd generation revenues will be meaningful for the year. While they indicated it was difficult to predict exactly when design wins turn into production, they implied meaningful could result in 10 to 25% of revenues. They also expect higher production will stimulate further demand. They also expect to announce a number of new 2nd generation products over the coming months. As 2nd generation production increases, gross margins should recover back to the low to mid 50% level over time. The market opportunity relative to 2nd generation products appears to be as much as ten times the opportunity in 1st generation products. The entire power component market represents as much as $30 billion. Vicor's strategy is to provide 2nd generation products that will address a much larger share than they can address with 1st generation products. They also said they expect 1st generation products to still have a long life ahead. On patent litigation, management said the $22.5 million Reltec settlement would be recognized from an escrow account over 2 years providing Vicor meets certain milestones. They said they have “many more nets out” and expect to “catch more fish.” Management also said they are very pleased with the progress they are making with their new Japanese subsidiary. The tax rate is expected to remain at 32% for 1999. Vicor seems to be turning the corner in their transition to 2nd generation products.

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