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

To: pat mudge who wrote (1388)	5/20/2000 1:17:00 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 3951

Pat, Interesting numbers. While the PIRI acquisition already looks good on a relative PSR basis (thank you, JDSU), the "X factor" of having a quick sales ramp simply by adding a shift and weekends to an existing facility may seriously understate how good a value SDL is getting here. I believe Don also touched on the possibility of more than two shifts (or, at least, contrasted PIRI's current one-shift operations with SDL's three-shift operations). A shift to full 24/7 production could bring further leverage (my presumption as a Monday-morning quarterback is that it would be easier and quicker to transition a qualified facility to 24/7 than to build and qualify new facilities, so a 24/7 ramp would be likely to occur first, BWDIK). One caveat, though, is whether ASPs will remain at current levels even as PIRI ramps supply so rapidly. A Devil's advocate could suggest that the high operating margins reflect scarce supply, which would be offset to some extent by the production ramp. I have no idea whether equating unit production increases directly with revenue increases will work (OTOH, they could have better scale efficiencies and procurement leverage thanks to the volume to offset an ASP decline). If ASPs do not decline meaningfully in the face of a unit ramp, then I think the model works. Also, HQ's FY00 estimate of $379MM is probably a low-ball to start with. Mgmt. said point blank to expect a 25% sequential rise in Q2--implying Q2 revs (ex-PIRI) of around $90MM. What is HQ's estimate for Q2? It should be at least $90MM. I don't know how they get the figures for Q3 and Q4. But if you just take mgmt's gimme number for Q2 and extrapolate Q3 and Q4 at 25% sequential (ex-PIRI), you get $415MM for FY00 (72, 90, 112.5, 140.625)--about 10% higher than HQ's estimate. I believe we could see an additional $80.6 from PIRI's Q3 and Q4, or a total of $459.6, rounded to $460M. I think you said the $80.6MM was for Q4 alone ($67.2MM for Q3). So those two together would in fact be $147.8MM, which, added to the $415MM figure, gives $562.8MM. And that is just the reported figure--add in PIRI's Q1 $20MM and Q2 $24MM, and you get a pro forma $606.8MM for the combined enterprise over the entirety of FY00. If SDLI were given a trailing PSR of 50X, you have a market cap of $30.3BB--divided by 88MM shares, that comes out to $344 a share in January 01. Note that JDSU and SDLI have traded at significantly higher PSRs than 50X, but you never know what can happen to that multiple. NB. The above is just "fun and games" and should not be taken too seriously. Any number of things could happen to throw the figures outta whack. But it doesn't hurt to hope :). Concur on Russell Crowe; IMO he is the new Harrison Ford.