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Technology Stocks : International Rectifier (IRF) -- Ignore unavailable to you. Want to Upgrade?

To: James Yu who wrote (1446)	1/21/2000 4:48:00 PM
From: John Miz	Respond to of 1712

Salomon Smith Barney Friday, January 21, 2000 --SUMMARY:--International Rectifier--Semiconductors * International Rectifier reported second (December) quarter EPS of $0.23 (versus $0.02) on revenues of $171.1 million (up 29% year over year and up 12% sequentially). This was well above our $0.17 estimate, which was in line with consensus. * The upside to earnings came mostly from strong revenues and higher margins, driven by demand in data processing and wireless markets. Future demand also looks excellent: orders rose 57% yoy and 15% sequentially, and the company is 80% booked for the current quarter. * Given the positive trend in orders, margins, and expenses, we are raising our FY00 (June) EPS from $0.76 to $0.95 and 2001 from $1.50 to $1.80. * We reiterate our 1H rating on IRF, and are raising our target price from $30 to $50, 25x our calendar 2001 EPS estimate of about $2.00.

To: James Yu who wrote (1446)	1/21/2000 4:49:00 PM
From: John Miz	Read Replies (1) \| Respond to of 1712

1) In seeking to improve its margins and diversify its product line, the company began to spend heavily on developing new product lines, including sub-systems, which are "smart modules" for controlling electric motors, lighting ballasts, and automotive electronics. These sub-systems made up 10% of revenues in June, 13% in December, and should grow to 20% by June 2001. They also carry gross margins 10-percentage points greater than discretes. 2) The company is also shipping new circuits it calls "power ICs," which integrate power MOSFET and control functions on a single chip. Sales of these products, which also carry higher gross margins, were up 16% sequentially. 3) Finally, some of the company's strongest MOSFET shipments are coming from the portable cell phone and data processing markets. These use a high-priced "trench" FET, which is commonly employed in low-power applications. Structural changes also paying dividends. In additon, the company made structural changes that are making a difference internally now that the market has picked up. For one, it reduced its cost structure by about $100 million in the past two years by reducing materials costs, improving yields and shrinks, and by moving more of its backend capacity to Mexico. Finally, the company has begun to outsource 10% of its revenues, moving to 30% over the next couple of years.