To: Logain Ablar who wrote (1417 ) 7/3/2000 8:46:57 AM From: John Pitera Respond to Silicon Storage Technology (SSTI) 89 5/8 +13 13/16: The stock rocketed out of the starting gate today in the wake of Thursday's after hours news flash. The company announced that it expects 2Q earnings will be greater than $0.50, well above the current First Call consensus of $0.39. Revenue for the quarter is expected to increase more than 50% over the first quarter and over 300% above the second quarter last year. Flash memory is a key component in hand held digital assistants as it provides storage for these small devices and is able to retain its data when the device's power is turned off. The sector has been particularly hot with SSTI rising as much as 180% for the year at its June high. PALM (31 15/16), a leading provider of these hand held computers, reported better than expected 4Q earnings and more importantly for SSTI, they indicated that there is a significant shortage of flash memory. Earnings estimates for the memory maker have been rising over the last 90 days with the consensus for FY 00 and FY 01 at $1.70 and $3.40, respectively. Based on these figures SSTI is currently trading at a respectable 26x the latter figure. If the numbers are so impressive and demand remains strong, why did the stock tumble 35% into this week's low? The reason again is the demand. With the need so high, manufactures such as Hitachi, Fujitsu and Intel, have recently announced huge increases in capital spending to ramp up production of flash memory. The general consensus, however, is that it will take six months to a year before there are serious concerns of overcapacity. This suggests the dramatic 100% increase in earnings for FY01 will be met and that the sector will continue to outperform the market for at least the next six months. One caveat for this outlook comes up in the latter part of September. This marks the end of the lockup period for the 2.15 mln secondary share offering filed in March. --
