*AV*--WFR--I will need to review all posts mentioned from the very nice helpers on this thread (Scott, etal.) but I do not think there is much more to add, with one exception.
Patrick brought up the subject of hedging against a negative situation. They only 2 things that can really affect WFR is a severe downturn in the industry which will cause an over supply of wafers or a reduction in the amount of epi wafer used in the industry.
As mentioned before, epi wafers (epitaxial silicon deposited on the bulk silicon) are required for most of the advanced process technologies (especially DRAMs, etal.) EPi wafers command a higher price for the extra processing which results in high profit margins.
The advent of the High Energy Implanter processes such as BILLI, may result in a possible alternative to epi wafers for some companies. The high cost of a MeV (High Energy) Implanter would be paid back and justified within a very short period of time when you factor in the cost savings associated with the purchase of epi wafers.
The lead sled dog for MeV, is a company called Genus, Inc. (GGNS). They are trading in the $5 range, which makes it a very attractive stock. They have had problems with both the equipment uptime and the process and it has been inferred that they are trying to shop themselves to someone else in order to carry on the MeV programs. If this is the case, the premier implanter suppliers in the marketplace are Eaton Corp. and Varian Corp. Eith company could, if they wanted to, swallow up GGNS. MeV is a productivity enabling and enhancing technology which is expected to outperform other areas of the equipment sector. (One estimate suggest a 1997 CAGR of 16% for the industry and ~25% for MeV).
GGNS would be a nice way to hedge against a deterioration in margind on due to epi wafer consumption. Either way, WFR will be manufaturing the same amount of bulk silicon. WFR is an absolute in this industry and is a very valued core holding for me. However, just as a hedge, a corresponding amount of GGNS would buffer any momentary perturbations in WFR price performance.
WFR TIMEFRAME - this year will see the $40 prices and if we cross our DRAM fingers, a repeat of the previous $50 highs. If you are asking short term, I beleive $35 is achievable by May Day. They take around 1 month to report previous quarter and stock moves nicely before reporting. |
