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Technology Stocks : Silicon Valley Group
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To: Raybert who wrote (2022)3/16/1999 12:22:00 PM
From: Ram Seetharaman  Read Replies (1) of 2946
 
I don't disagree with you that this stock is undervalued in some sense, and has upside potential by end of 2000. It is not a bad deal to buy now, since it is trading $5 below book value. Most analysts I have seen lately are not even calling it a "market performer" and the most recent rating given was a "neutral" early this year when SVGI tried to buy into WJ. Today it is up because all its peers are up on upgrades and the contagion is spreading to SVGI. One thing I know about the semis and chips - they employ all kind of smart engineers and technicians who come up with great products. But market doesn't necessarily accept these as a "blowout". Often times these products sit on the shelves and are eventually sold at discounts affecting the "bottom line". SVGI is an archetypical example. Look at Hewlett Packard - they engineer all kinds of products and they have been pushing PCs for nearly twenty years. Market is not accepting their PCs as well as they accept those of Compaq and Dell. SVGI has similar problems. Their sales growth and profits are not the top in their field. An 8.5 % profit margin is not all that great for SVGI compared to the 30+ % margins for Novellus. Unless this changes, they will remain a "dog". It is a management problem - just like the one VLSI faced for years. I hope SVGI gets a suitor to change all this.
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