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Technology Stocks : International Rectifier (IRF) -- Ignore unavailable to you. Want to Upgrade?

To: JakeStraw who wrote (1543)	3/12/2001 10:45:00 AM
From: Jack Hartmann	Read Replies (1) \| Respond to of 1712

Is International Rectifier Really That Much Better? By Herb Greenberg Senior Columnist 3/12/01 10:08 AM ET Rectifying reality: In an item the other day on tech stocks that Bob Olstein of the Olstein Alert fund likes, I noted in passing that one of his faves, International Rectifier (IRF:NYSE - news - boards), is a favorite among shorts. A key point is that IRF sells power management-related semiconductors to the likes of Cisco (CSCO:Nasdaq - news - boards). Its other customers include Nortel (NT:NYSE - news - boards), Motorola (MOT:NYSE - news - boards), American Power Conversion (APCC:Nasdaq - news - boards), Compaq (CPQ:NYSE - news - boards), Lucent (LU:NYSE - news - boards), etc. -- all of which have preannounced disasters and have tons of excess inventory. What's more, its competitors, including Fairchild (FCS:NYSE - news - boards), Intersil (ISIL:Nasdaq - news - boards), National Semiconductor (NSM:NYSE - news - boards) and ON Semiconductor (ONNN:Nasdaq - news - boards) have all reported weakness in power chips. (ON Semi had yet another disastrous preannouncement last week.) International Rectifier is considered good, but is it that much better than everybody else? Analyst Jim Coleman of Fechtor Detwiler doesn't think so. While IRF is the "preferred vendor," and while it may have better "specsmanship than the others," he notes that companies don't sole source. While IRF likes to think of itself as a "technology company, it really has no overall technology advantage," Coleman says. " It sells a commodity product." And for that IRF trades at nearly three times sales vs. its historical average of around one times. Says one hedge fund manager who is short IRF: "Over the last few years in the up cycle, IRF has seen massive positive operating leverage. Since 1999 revenues have gone from $550 million to current $1 billion-plus run-rate. Gross margins have increased from 27% to 41% and EBIT [earnings before interest and taxes] margins from less than 5% to 20%. A normalized mid-cycle margin for this business seems to be in the 10% range, and it always dips significantly below on the way down (and multiple gets destroyed as well; look at five-year stock performance)." I should mention: Olstein doesn't care; he's in it for the long haul (and he also has a basket of other stocks to cushion the blow). And I heard from a reader who says IRF's plant in Tijuana is operating full tilt. The company didn't return my call. thestreet.com Jack (no position)