Some recent interesting commentary from Stocksure at the Motley Fool:
boards.fool.com
Some of these products contain high density flash as well (not SSTI's designated
market, although the AGATE acquisition gives them a spot on this field as well)
SST's migration to the mid-tier and high-end flash markets could come sooner than some
expect. As you may know, the company's SuperFlash product line only goes up to 16 Mb,
as compared to the 128 Mb products of AMD, Intel, and others:
ssti.com
Furthermore, due to the fact that the 16 Mb chips are manufactured via a .25 micron
process, while others in this field are able to produce these chips via a more, advanced,
cost-effective .18 micron process, SST only has competitive flash offerings up to the 8 Mb
level. However, this is all set to change, as the company's going to start cranking out 16Mb
and 32Mb chips next year at .18, .15, and .13 micron levels, at a number of its partners'
fabs:
www2.vcall.com (go to slide 25)
The story still gets better: at .18 micron and below, SST will be able to utilize its recently
developed self-aligned split-gate technology:
ssti.com
SST's self-aligned SuperFlash cell is the industry's first split-gate architecture flash
memory cell to offer self-alignment. Traditional split-gate flash memory cells require
built-in tolerances to align different layers of the memory cell, thereby resulting in a
larger flash memory cell size and a higher manufacturing cost. By developing a
self-aligned process architecture, SST has eliminated the need for built-in tolerances,
leading to a 40 percent reduction in the size of the SuperFlash cell.
What's interesting here is that, even today, via non-self-aligned offerings, the technological
advantages provided by SST's SuperFlash products, both in terms of cost and size, have
allowed the company to greatly expand its margins, and gain significant amounts of market
share. Now, with the company rolling out higher density products, shifting to more
advanced manufacturing processes, and beginning the utilization of their self-aligned
split-gate technology all at the same time, the upside surprises may be far from over. The
wireless market, although only a fairly low portion of the company's revenues as of now,
could especially become a huge driver going forward, provided that the company scales its
products: with handset manufacturers constantly trying to outdo each other in terms of
packing more and more functionality into smaller and smaller handsets, the size benefits of
self-aligned SuperFlash chips act as a huge competitive advantage.
And of course, there's the issue of the company's current valuation (less than 15x trailing
earnings, 5x 2001 estimates), one that I'm sure has been beaten to death, but is nonetheless
startling. Naturally, there have to be a number of people looking at the valuation, and
thinking "if it's too good to be true, it..." Such skeptics out to keep in mind the fact that,
between December '98 and last July, SST's stock was up nearly 6,000%. No, that's not a
typo.
Given that such a tremendous move to the upside's taken place, and given how the market
at large has been, uh, less than irrationally exuberant as of late, it's not difficult to see why
the stock's been hit fairly hard recently, in spite of how cheap it is. In essence, what's going
on is the direct opposite of what takes place near a market top, where every company
within a given sector that happens to be en vogue at a given moment is given a free ride to
the moon, valuation and business prospects be damned. Of course, as the past few months
have shown, those space trips tend not to last too long, and likewise, attempts to bring
down a company with bottom line numbers increasing at an astronomical trajectory are
generally fated to have only short-lived success.
Eric |
