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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (13005)	1/12/2004 7:39:54 PM
From: Donald Wennerstrom	Read Replies (2) \| Respond to of 95738

One of the SOX members, LLTC, is due to report 2nd quarter earnings tomorrow. The earnings are expected to be very good, but according to Ping Yu of Briefing.com, they need to be very good to support the present market valuation. Here is the take on LLTC this evening - it will be interesting to see what happens tomorrow - from Briefing.com <<Linear Technology (LLTC) 44.95 +1.25: Linear Technology is scheduled to report Q2 results after the close Tuesday. Reuters Research prints consensus EPS at $0.23 on revenue of $183.75MM and Q3 at $0.24 on $194.40MM. Recent Performance Q1 sales grew 22.6% Y/Y on strong demand for portable electronics across all geographies. U.S. comprised approximately 27% of sales; Europe ~19%; Japan ~16%; Asia-Pacific ~38%. Expect demand trends to continue. Q1 gross margin improved 200 bps Y/Y to 76.2% manufacturing efficiencies. LLTC has substantial unused capacity; expect further gross margin improvement as company realizes efficiencies on higher capacity utilization. Operating margin improved 600 bps Y/Y to 52.1% on tight expense control. Expect further operating margin improvement as sales continue to grow faster than expenses, aided by strong end market demand for portable electronics. Competitive Position Technology. 240 U.S. patents; 95 patent applications. Strong IP (intellectual property) position. Cost Competitiveness. Generally price/performance competitive. Customer Base. Diverse customer base. LLTC sells to over 15K OEMs (original equipment manufacturers) directly and/or through distributors. Arrow Electronics, LLTC's primary domestic distributor, accounts for approximately 15% of sales. Financial. Strong balance sheet. Over $1.6B in cash and securities; no debt. Quick ratio of 11.0:1. Current ratio of 11.6:1. Valuation On an inverted DCF/EVA basis, assuming firm balance sheet management and: * static operating margin at 51-52%, LLTC's valuation implies that the company must grow revenue in the high 30% range for the eight years beginning in F06 in order for investors to justify owning shares at current valuation. * steady Y/Y improvement to 55% operating margin by F06, LLTC's valuation implies that the company must grow revenue by 35% for the eight years beginning in F06 in order for investors to justify owning shares at current valuation. * steady Y/Y improvement to 60% operating margin by F06, LLTC's valuation implies that the company must grow revenue in the low 30% range for the eight years beginning in F06 in order for investors to justify owning shares at current valuation. Consensus Y/Y growth for F04 and F05 is 25.1% and 21.8% respectively. On a price multiples basis, LLTC trades at 18.5x F04 revenue of $758.62MM (+25.1% Y/Y) and 15.2x F05 revenue of $924.33MM (+21.8% Y/Y); 47.8x F04 EPS of $0.94 and 39.1x F05 EPS of $1.15. Summary Shares are priced at a high premium, reflecting LLTC's strong technology and financial position, solid execution and relatively stable operating history, and above average gross and operating margins. However, management will need to achieve revenue growth and operating margin expansion significantly above the industry average and recent performance for investors to justify owning shares at current valuation. Given current end market growth expectations, this will be difficult to sustain over the long-term even with market share gains. As a result, we would wait for a 35-40% pullback before initiating a minor position.--Ping Yu, Briefing.com>> Might have to wait a long time for that "pullback".:) Don