Annual Meeting Notes:
Meeting started at 2:00 P.M., ended at 2:45. Quick and to the point! There was no media table this year. Do not think any media was there, but not sure. At the board meeting prior to the annual meeting they declared a 9 cent dividend for the quarter.
Business is picking up. COHU has rehired 200 so far this year after the large layoffs of last year. COHU has 70 customers in 130 different locations (I think this refers only to the semiconductor test business). 3 new handlers have been introduced in the past 12 months. R & D will continue to be high. COHU has some of the best products out there, but competition is ever present and a concern.
Questions and answers (not exact words, but I tried to get the meaning. Forgive the spelling on other company names):
Q: Will COHU expand into testing?
A: No. COHU may expand into other areas than test handling equipment, but not into actual testing. This is a highly specialized area that already has strong competition. (It was not mentioned, but I am sure that another reason is that COHU does not want to compete with their customers)
Q: What are your thoughts on competition from Teredyne?
Teredyne is trying to combine a test handler and tester. They actually used a Delta Design for this to start, but now have their own unit. It is not widely used at present, but has potential to be a threat. The 3 major US test companies currently use Delta Design, and will probably continue to do so.
Q: Aetrium competition?
A: They are doing poorly as is Cyco (spelling?).
Q: Any plans to expand the number of shares outstanding (i.e. stock split)?
A: No. It has been discussed, and COHU will do it under all the right circumstances, but there are currently no plans. Schwan specifically mentioned that they do not want to chance the stock price going into the single digits.
Q: There were three questions on stock trading. One asked why COHU does not show up on the ticker tape, one commented that most trades occur in blocks of 500 and wondered if most of the trading was just between market makers, and the third asked why the spread between the bid and the ask was so high.
A: (A little audience participation is included with these answers) COHU does not show up on the CNN/FNN tickers, but does on CNBC due to different and unknown criteria. The Nasdaq system does exagerate the number of shares traded, but investors (not just market makers) really do buy and sell the stock. Schwan agreed that the spread is high and has discussed it with Nasdaq. Nasdaq denies that the spread is any larger than the average stock.
Q: Will 1999 be better than 1998?
A: Orders are picking up, and the semiconductor business appears to be on the upswing, but 1st Q 98 was very strong compared to 1st Q 99, so the year as a whole may not be better.
Q: (This one was mine) Any plans for all that cash, such as a stock buyback or acquisitions?
A: Cash levels may go down as receivables go up and capital improvemetns are made as the cycle starts going up. Acquisitions have been looked at, but there are currently no plans to make any.
Q: Market share?
A: COHU has 18%, Advantest has 30%, #3 has only 7%, and about 15 companies with the remainder. COHU is always trying to take market share away from the competition, but it is difficult since most customers will stay with the current supplier unless there is a specific reason to switch. Also, it is very hard to break into Japan and Korea. Advantest has the advantage in DRAM testers, but COHU has a better product for other testers.
Q: Profit margins?
A: They are improving as business picks up, but will probably not get to the 26% margins that they were at in 1997.
Q: With improvements in technology, what are the chances that test handling equipment will become unnecessary?
A: "Could happen, but probably not in my life time". The current state of the art is nowhere near any advances that would make test handling equipment obsolete.
After the meeting I talked to Schwan 1 on 1 for about 5 minutes. The last three questions came from that conversation. Nice guy, and seemed a little more outgoing this year than I remember him from last year. Must be because business is looking so much better this year!
Great Investing to all,
STEVE
P. S. The San Diego Union-Tribune mentioned COHU in Sunday's paper. Don Bauder covers the local stocks and has mentioned COHU favorably several times in the past. Sunday he quoted David Allen of Granite Financial Group forecasting earnings of $1.10 for 1999 and $2.36 for 2000. The Headline was "Cohu gains momentum on way to 21st century". This was mentioned during one of the questions, and Schwan commented that he agreed with the article. |
