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Technology Stocks : S3 (A LONGER TERM PERSPECTIVE) -- Ignore unavailable to you. Want to Upgrade?

To: John Nasser who wrote (14523)	9/18/2000 8:33:08 AM
From: Arthur Radley	Read Replies (1) \| Respond to of 14577

From home page here on SI.....S3 Greg Heard of the Greenspring Fund (800-366-3863), provides the following stock idea on S3 (SIII 10 1/2). Below is the write-up. S3 is the leading manufacturer of the portable MP3 player, a digital music player similar to a Walkman. Music can be downloaded from the Internet onto these MP3 music players, which are selling like hotcakes and are especially popular among teenagers. Chip Carlson of the Greenspring Fund mentions that S3 has entered into an agreement with Nike to manufacture MP3 devices. Within the next few weeks, Nike will begin marketing and selling their version of the MP3 player manufactured by S3. "Nike is planning a huge marketing blitz of its version of the MP3 player during the Olympics," says Carlson. "Nike's marketing efforts will definitely boost MP3 sales and S3 will directly benefit from this." Carlson adds that S3 sold its semiconductor manufacturing business to a Taiwan company called United Microelectronics (UMC), receiving stock in UMC for the deal. Using UMC's current market value, Carlson figures S3's stake in UMC is worth almost $800 million, or about $9 per share. "Those moves will allow S3 to be profitable by the fourth quarter of this year" Morgan Stanley just began an underwriting effort to list the UMC American Depository Receipts (ADRs) in the United States. Carlson notes that the ADRs of Taiwanese companies typically sell at a premium of 30 to 50 percent with respect to the stocks' value on the Taiwan Stock Exchange. The ADRs of Taiwan Semiconductor Manufacturing, the largest publicly traded company in Taiwan, trades at almost a 50-percent premium in relation to its value on the Taiwan Stock Exchange. UMC is the second largest publicly traded company in Taiwan. Carlson thinks the UMC ADRs could command a similar premium, with S3's stake possibly being worth in excess of $1 billion. S3 is in the middle of selling its nonprofitable graphics chip business in an announced deal that will fetch more than $200 million. The company is also shutting down its money-losing graphics board business. "Those moves will allow S3 to be profitable by the fourth quarter of this year," comments Carlson. Carlson figures S3 could earn 40 cents in 2001 and 80 to 85 cents in 2002. Given S3's MP3 business and its stake in UMC, this pro thinks shares of S3 are worth at least $20.