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

To: thecalculator who wrote (14489)	9/4/2000 2:17:45 PM
From: Zeev Hed	Read Replies (2) \| Respond to of 60323

Calc, I have assumed that all the funding will come from equity. If $550 MM can be loaned from a bank (have you ever seen a bank loaning out $550 MM to a company with net equity of under $150 MM?). If they indeed loan that much money on such a narrow equity base, you'll have to assume debt service of about $50 MM per year, and for a company that is not making operational profit (even in the last quarter, the seeming profits are from "financing", not operation, if you take such non recurring vents, then buy ALSC, their current PE is under 2 due to a one time profit on sales of assets, similarly, the current PE of SNDK is low due to a one time profit on sales of assets). The point remain that the date at which Fab 2 might be ready to open (early to mid 2002?) will be smack in the depth of a semi down cycle, and companies like ALSC do not have to take production, but are guarranteed minimum fab facilities, if they want to. Thus the risk of a downturn are fully shouldered by TSEM. If indeed they are going to fund this with $550 MM in debt, that will put the company at potential risk of not surviving, just like another Israeli semi outfit (I think its symbol was ISSI?) that went down the drain. I suggest that you believe management when it says it can raise $550 MM in bank debt, but make the independent assessment of the risk of a debt laden balance sheet. iIf they survie the next downturn unscathed, then by 2003 they may generate $300 MM in cash (and thus my comment earlier, that from the trough of around $10, sometime in 2002 one should expect by 2005 a six to ten bagger). As for Fab 1 generating $100 MM, I doubt this is each year, from what you cite this is cummulative, and hopefully they can do it. Right now, if you look at QOQ growth in the last two quarters, it is not particularly impressive in terms of top line revenues. That may change, but a prudent investor would want to see proof, particularly in view of the fact that Tower has disappointed badly in the past. Zeev