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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (14479)	9/4/2000 1:12:44 PM
From: thecalculator	Read Replies (1) \| Respond to of 60323

I was "generous with ??? Hah-hah-hah...right Zeev, quite the "generous" fella you... The point I was trying to make, ... Building Fab 2 will cost a good 1 B, ... If they go the route of equity financing, then, on top of the 60% to 70% dilution due investors ... you could add anywhere from 20 MM to 40 MM additional shares (raising the total share count to between 55 to 75 MM shares), leaving current shareholders holding between 1/6 to 1/4 of the company, if you take the medium of 65 MM shares, at $10/share it gives you a cap of $650 MM, for sales which next year surely will not exceed $300 MM, so you see, $10 share is more than a PSR of 2. In view of the risks associated, I think that this could be generous, Zeev, my stuff is just a rehash of what the respective company's top dogs have said. Now one can either choose to believe what they say, ignore it, or worse, one can make up their own scenarios, as you have apparently done, to suit their own purposes, and in the process, throw credibility out the window. For whatever reason, you have gone through an elaborate exercise with spurious figures to try and convince somebody that the financing scenario is extremely high risk and that Tower is overpriced as a result; and apparently, Zeev Hed thinks investors should ignore what company management has stated. (So who is Zeev Hed and why should any investor believe him more than the respective company's management?) Regarding financing, Tower's CEO stated on the joint SanDisk/Tower conference call: our plan is to raise about $450 million as equity...of course this is new equity to the company. This is investment equity, the majority of which comes from the partner/customers...approximately 15 million more shares: All in all to complete the project we will issue about 10-15 million new shares. We expect to have between $300-$350 million from the Government in terms of a grant, and then about $550 million of loans from the bank. This will give by itself, about $1.3 billion. Now, you have to take into account that a substantial part of the investment, in fact more than $400 million, is going to be done only in 2003, which is putting the equipment in to bring the fab from about 20,000 wafers per month to about 33,000 wafers per month. In 2003 we are expecting to generate at least $300 million from cash from operations. So when we put a financing plan for $1.3 billion, this is what we believe sufficient to start a project like this quite safely. We are also expecting, by the way, to generate cash from our Fab 1. We have assumed that at least $100 million will come from Fab 1 operations. Regarding the PSR, you said: INTC has been around a little longer, happen to be a "gorilla", command its market place and has gone through many cycles where it's own PSR was around 1. Zeev, Can you name such a time since Intel got out of the commodity memory chip business years ago? I don't think Tower is planning to fill Fab 2 with commodity stuff either. Furthermore, can you cite any time that the top three foundries serving the fabless industry have ever sold for 1x-2x sales or less? For additional consideration regarding the potential impact on Tower of any near-term potential capacity glut...do you think Eli would go to TSM or CHRT to get his controllers fabbed if they were to offer a lower price than Tower? There are just some things that, given the opportunity, customers would prefer to keep out of the hands of the Far East, where a blatant disregard for foreign IP has already been demonstrated time and time again. Even mighty INTC is regularly cut down to one half of its most recent peak value. What do you expect with INTC selling at over 16x sales? Tower is currently selling at less than 5x sales, with a dramatic increase in their sales projected. You also said: They are not breaking into the black even at the sales rate of $100 MM annually So you chose to overlook Tower's recent profitable quarter? <g> Now regarding future sales...in one of the recent press releases, a Tower co-CEO recently stated he thought the sales would approach $700 million in five years. you really did not address any of the issues I was "generous with, like future share count, and expected annual sales rate (TTM) by mid 2002 Consider it "generously" done (though I missed your exact date).