Suddenly it's "splitsville" for chip stocks as share prices climb
By Bill McIlvaine
Semiconductor Business News
(12/17/99, 01:08:40 PM EDT)
NEW YORK -- If you still need a measure of the semiconductor industry's comeback from the crash of 1998, you might consider the stock split. In recent days, a number of semiconductor makers and capital equipment companies have announced they are splitting their stocks, following the lead of companies in other industries in the booming economy of 1999.
The trend may be reflecting a bigger recovery than the industry had expected a year ago, when chip stocks were languishing (see story from the Nov. 15, 1998 online publication) and capital equipment stocks were downright dismal (see related story).
On Thursday, KLA-Tencor Corp. announced a two-for-one split in the form of a 100% stock dividend, which will be paid in January.
Siliconix Inc., a subsidiary of Vishay Intertechnology Inc., on Wednesday declared a three-for-one split, to be effected by issuing two shares of common stock for each share of the company's common stock outstanding. Siliconix, a maker of power MOSFETs and analog ICs, also plans to increase the shares from 10 millin to 100 million. Depending on stockholders' approval, the split will take effect in February.
Kopin Corp., a Taunton, Mass., maker of gallium arsenide (GaAs) heterojunction bipolar transistor (HBT) wafers and microdisplays, announced Thursday that it was increasing the company's authorized shares of common stock from 20 million to 60 million, which was necessary to accommodate a two-for-one stock split announced earlier in the month.
And TranSwitch Corp., a fabless maker Internet connectivity ICs based in Shelton, Conn., on Wednesday announced a 3-for-2 stock split of its common stock. That followed another 3-for-2 split in April that brought the number of common shares outstanding in the company to 25.3 million. The just-announced split will lift that to 42.0 million shares next February.
A.A. (Tad) LaFountain, semiconductor analyst at Needham & Co., observed that the average chip stock has roughly tripled, and many have quadrupled or quintupled. ?It is a logical result of a very pleasant upward turn in the stocks,? LaFountain stated.
?What you're seeing is a function of the fact that these stocks have risen so far,? said Tim Summers, a semiconductor equipment analyst at financial researcher Advest Inc. in Chicago. ?Many of these stocks are approaching and even exceeding $100 a share.?
That prices them out of the range of the retail investor -- ?or at least that's the perception of the companies' management,? according to Summers. By bringing the stock price down into the mid-double-digits, ?it makes the retail investor feel like they can participate.?
Gus Pinto, senior director of business development in the corporate communications department at KLA-Tencor that stocks priced above $100 a share often are not purchased by mutal funds.
"If they are above $100, they will be seen as too pricey," Pinto observed. "It's not just capital equipment and semiconductor stock, but other companies, such as GE and Microsoft have announced stock splits too. All of these companies have been $100 [per share], and if you want to maintain liquidity in the stock market and have a lot of people buy your stock, you must keep the price within their range."
That was echoed by A.A. (Tad) LaFountain, semiconductor analyst at Needham & Co. in New York. Many investors buy stocks in round lots of 100, and an $80 or $90 stock price translates into an $8,000 or $9,000 commitment, he said.
?If you keep a stock in the range of $20 to $40, a round lot isn't quite so onerous,? LaFountain explained.
It also usually has the effect of boosting the price of the existing stocks. KLA-Tencor, ehe San Jose-based wafer metrology systems maker, whose stock price bottomed out at $23 in October, began trading today at $98 and even hit $101, according to Summers.
Kopin's stock was trading at $38 in October, hit $80 when the split was announced on Dec. 9, and was still at $80.125 at mid-day, the highest Kopin's stock had been in at least five years.
Summers said he wouldn't be surprised that other capital equipment companies like Applied Materials, Novellus Systems, Lam Research, and ASM Lithography split their stocks soon. ?Applied is up to $113,? he noted.
The turnaround of chip companies' fortunes in the past year has been spectacular, said Summers. ?Lam Research, which was at $7 once in 1998, is now up to $92.? When it comes to splitting stocks, he said, ?It's not a question of if, but when.? |
