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Technology Stocks : SDL, Inc. [Nasdaq: SDLI] -- Ignore unavailable to you. Want to Upgrade?

To: hospitalman who wrote (1380)	5/20/2000 1:05:00 AM
From: pat mudge	Read Replies (1) \| Respond to of 3951

thanks for your work again. So far you are the only poster I have read who found a logical way to connect Chaucer with fiberoptics.:))However, if you start posting sonnets about Raman amplifiers and Indium Phosphate we will conclude you have finally gone off the deep end. I'm not sure what Chaucer would have thought about fiber optics but I'm quite sure he would have loved the Internet. His Canterbury Tales bridged social and cultural gaps in much the same way these public forums do. As his characters tell their stories, they reveal themselves without realizing it and it's the same here. While Chaucer's work was a literary device, our exchanges embody in real time what he created in fiction. Back to SDL, I've done some numbers based on the PIRI acquisition that I hope will spark some debate. From H&Q report on day of PIRI announcement: Management indicated that PIRI's gross and operating margins are higher than SDL's. While we are not changing our model until the closing of the deal, we expect it to be materially accretive. PIRI sales totaled $57 M in CY99 and exceeded $20M in Q1:00, all from AWGs, and we believe $125-150M in sales in CY:01 is possible. Assuming a 77M SDLI share count and the issuance of 11.2 M new shares, FY:01 profit from PIRI could be $0.12 to $0.15. However, until closing, our estimates remain $379M/1.07 for FY:00 and $575/1.43 for FY:01. With respect to valuation, at potentially less than 10x next year's sales, it is reasonable on a relative basis. >>> Now, based on what was said at yesterday's annual meeting, I believe the numbers will come in far higher. Follow my thinking: Beginning in Q3, PIRI's manufacturing line will move to 2 shifts/7 days a week from its current 1 shift/5 day schedule. If we start with Q1's revenues of $20 M and give them a 20% sequential growth rate (lower than SDL's but in line with PIRI's y/y growth), they should make $24 M in the current quarter. The acquisition will close in June, so we have to go to Q3 when SDL will be running the PIRI operation on the 2 Shift/7 day schedule. I'm not going to factor in 20% growth for Q3 simply b/c I figure adding a second shift can't be 100% efficient. I'll use the $24M figure and double it for the second shift for $48M, then add $19.2M for the extra two days to get $67.2M for Q3. By Q4 we should see the 20% sequential growth return, giving us $80.6M. Right now H&Q is estimating FY:00 revs at $379M and I believe we could see an additional $80.6 from PIRI's Q3 and Q4, or a total of $459.6, rounded to $460M. Using 30.2% operating margins, net earnings would be $139M. And using H&Q's shares outstanding for FY00 of 88.2M, EPS would be $1.57, or roughly 50% above their current target of $1.07. If these estimates are anywhere near accurate, we could extrapolate PIRI's revenues for Q1:01 and Q2:01 (including 20% sequential growth) and get $96.72M and $116.06M respectively. Doing the math using H&Q's current SDLI estimates and my PIRI estimates, I get EPS of $0.76 vs. current estimate of $0.32 for Q1:01; and $0.88 vs. $0.35 for Q2:01. (They used 84.624M shares in Q1:01, and 86.624M in Q2:01, so comparisons aren't exact.) Yesterday Don said they would add a second line within 12 months, so beginning in Q3:01 these numbers could be doubled again. I may be way off so I welcome anyone to jump in and tweak them anyway they see fit. This is what you do when you have to take a kid to the airport and their 7:00 flight is delayed to 11:30. And since I'm blowing time, let me tell you the best movie to come out recently is Gladiator. I went because I'm a Russell Crowe fan and was pleasantly surprised it was as good as it is. Some great uses of digital film, too. The battle scenes at the beginning are worth the price of the ticket alone. Okay, time to go. Pat