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Technology Stocks : Alliance Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: DJBEINO who wrote (2338)	1/16/1998 5:38:00 AM
From: MoonBrother	Respond to of 9582

IMPORTANT INFORMATION!!! Major analysts' coments on Dec. qtr results! Every single one of them has valued Dec. qtr's result above expectation! In the following notes, I will post all 4 analysts' comments that First Call covers. Enjoy. ------------- 08:06am EST 15-Jan-98 Hambrecht & Quist (Robert C. Chaplinsky, (415) 439-34) ALSC: December Quarter In-Line, But This Could Be The Bottom ** Hambrecht & Quist Hambrecht & Quist Hambrecht & Quist ** ALSC: December Quarter In-Line, But This Could Be The Bottom * ALSC reported December quarter EPS of $0.04 on $24 million in revenue versus our estimate of a loss of $0.01 on revenue of $27 million. The upside was primarily as a result of a better than expected earnings contribution from the USC joint venture and slightly higher gross margins. * Excluding an inventory pre-tax charge of $0.10 per share related to risk associated with declining memory prices and a $0.10 EPS contribution from the equity investment in the USC joint venture, ALSC would have recorded operating EPS of a loss of $0.06 versus our $0.07 operating EPS estimate. * ALSC benefited from stronger than expected profits from the USC joint venture foundry which contributed $0.10 per share in the December quarter, approximately $0.03 above our $0.07 per share estimate. * Using the valuation level in which S3 recently liquidated a portion of its interest in USC, we now estimate that Alliance's 19% share in the joint venture is worth approximately $170 million, or $4.30 per share in cash. We continue to anticipate that USC will undergo an IPO during mid-1998 from which the proceeds will be used to fund the construction of another leading edge wafer fabrication facility. * Sales outlook for the March quarter appears to now be improving for ALSC as backlog is strengthening and memory (SRAM and DRAM) pricing are stabilizing from their recent historic low levels. Gross margins should improve in the subsequent quarters as the company benefits from lower wafer prices and an improving mix in next-generation SRAM and graphics memory chips. Recommendation: Business fundamentals are improving slightly but visibility into end market demand and memory pricing remains very difficult. We maintain our Buy rating on ALSC as the stock is currently trading near book value and we believe the majority of the weakness in the company's business environment is already reflected in the stock price. Company: Alliance Semiconductor (ALSC) supplies memory (DRAM and SRAM) and graphics products to the computer and communications markets. The company's product sales mix as a percentage of revenue for the December quarter were DRAM (50%), SRAM (36%), graphics accelerators/memory (14%), and Flash memory (>1%). Alliance also owns a 19% equity stake in the 8" United Semiconductor Corporation (USC) joint venture wafer fab for captive supply of wafer requirements.

To: DJBEINO who wrote (2338)	1/16/1998 5:39:00 AM
From: MoonBrother	Respond to of 9582

Here is Lehman's comments ---------------------------- 10:37am EST 15-Jan-98 Lehman Brothers (M. A. Gumport, CFA 1(212)526-5368,) ALSC Alliance Semiconductor: Reported Fiscal 3Q98 EPS $-0.06 ------------------------------------------------------------------------------ * OPERATING EPS SLIGHTLY ABOVE TARGET; ESTIMATES EDGE UP; 2 MAINTAINED ------------------------------------------------------------------------------ JANUARY 14 POST CLOSE ALSC REPORTED DECEMBER FY3Q98 EPS AT -$0.06 INCLUDING A $0.10 INVENTORY CHARGE; OPERATING RESULTS SIGNIFICANTLY BETTER THAN TARGET. Our $-0.04 estimate had included a $0.03 inventory write-down, so, excluding write-downs, ALSC actually had a slight profit instead of a small loss. Versus our targets, sales decreased 14% from September FY2Q98 or down $2.2 million. (-8.1%) but EBITD was up $3.1 million. Most notably, gross margin (GM) was 18.1% (excluding write-downs) versus our 7.4% target (each margin point impacts quarterly EPS by less than half a cent). Operating expense ratio at 33.1% was 0.5 points higher than target. WE ATTRIBUTE THE IMPROVED GROSS MARGIN AND SMALL PROFIT TO TWO ITEMS: (1) Shift in mix back toward SRAMs and (2) Graphics DRAMs. In SRAMs, ALSC has been successful in geographically diversifying to serve tier 1 customers in Europe, and overall SRAM pricing conditions are OK. SRAM gross margins have moved up and we estimate they are now roughly in the 30% range. In DRAMs, ALSC moved quickly early in the quarter to focus on 256K x 4 graphics parts where pricing was surprisingly good. DRAM margins still likely are no more than 10%. MORE INVENTORY WRITE-DOWNS STILL A RISK, BUT EPS PROJECTIONS EDGE UP. We are maintaining a very cautious stance on ALSC's near term EPS prospects. We assume gross margin is stable in the upcoming quarter but declines again in FY1Q99 before beginning a sustainable uptrend as startup operation in graphics and flash turn more successful. Based on better gross margins, we now project FY99 at $0.30 (old: $0.25) and continue to project FY00 at $0.75. A BIG TEST: A BIG DROP IN INVENTORIES IN THE UPCOMING QUARTER. ALSC's $31 million inventory is about double where it should be and is little changed despite $32 million in inventory write-downs during the past two years. Discussions with management suggest inventories will be brought down by $10 million in the coming quarter. We would view that as a major positive: Clear evidence of management controls and the end of a string of "one-time" charges. 2 MAINTAINED; AMONG OUR FAVORITE MEMORY STOCKS. It is tough to express enthusiasm for memory stocks near term (we view the DRAM uptick of the past week as a fluke; we do anticipate a sustainable pricing rally, but not now). Still, ALSC has outstanding underlying value in its joint venture partnerships, and we believe its core operations , despite the current absence of earnings, also have value. Investors today are likely to give the just completed quarter mixed reviews (nice operating results, but sometimes its hard to express conviction in the operating results when one-time write-downs keep recurring), and the stock is unlikely to move far on today's better than anticipated results. But we think investors looking for exposure to a chip stock with dramatic upside leverage and very little downside risk will increasingly start to establish positions in ALSC as they see losses bottom. WE CONTINUE TO SEE A $13 ONE-YEAR TARGET AS ATTAINABLE. ------12/31/96--- ----12/31/97----------------------- ALSC FY3Q ----------------- --LB EST- --Actual---------- vs. -$Mil.- --Ratio-- ---$Mil.- --$Mil.-- --Ratio- Est. Sales (ratio: % ch.) $ 25.2 -45.6 % $ 27.0 $ 24.8 -1.8 % $-2.2 SRAM $ 6.7 $ 9.0 $ 8.9 1 Mbit $ 3.3 $ 4.5 $ --.- 256k $ 1.8 $ 1.7 $ --.- Other $ 1.6 $ 2.8 $ --.- DRAM $ 13.5 $ 12.9 $ 12.3 Graphics $ 4.5 $ 3.6 $ 3.5 Flash $ 0.2 $ 1.2 $ 0.1 Other $ 0.3 $ 0.3 $ 0.0 CGS (r.: % of sales) $(21.0) ( 83.3)% $( 24.0) $( 19.3) ( 78.1)% R&D (r.: % of sales) $( 3.7) ( 14.6)% $( 4.3) $( 3.3) ( 13.2)% SG&A (r.:% of sales) $( 2.1) ( 8.5)% $( 4.5) $( 4.9) ( 19.7)% EBITD (r.: margin) $( 1.6) ( 6.3)% $( 5.8) $( 2.7) ( 11.0)% $+3.1 Dep. (r.:% of sales)-e$( 0.8) ( 3.3)% $( 1.0) $( 1.0) ( 4.0)% Other (r.: % of sales)$ 0.4 1.5 % $ 0.2 $ 0.2 0.7 % Nonrec(r.:% sales)-1 $( -.-) ( -.-)% $( 2.3) $( 6.0) ( 24.2)% Pretax (r.: margin) $( 2.1) ( 8.2)% $( 8.9) $( 9.5) ( 38.5)% Tax (r.: tax rate) $ 0.7 35.0 % $ 3.3 $ 3.3 35.0 % Net (r.: margin) $( 1.3) ( 5.3)% $( 5.6) $( 6.2) ( 25.1)% Equity Invt. (% sales)$ 0.0 0.0 % $ 3.8 $ 3.8 15.3 % EPS-Basic (r.: % ch.) $(0.03) (160.0)% $( 0.04) $( 0.06) (100.0)% Sh.-Basic (r.: % ch.) 38.5 ( 6.6)% 41.0 39.4 2.4 % NOTES: 1) FY3Q98 $6.0 mil. inventory write-down.

To: DJBEINO who wrote (2338)	1/16/1998 5:40:00 AM
From: MoonBrother	Respond to of 9582

Needham & Co.'s comments ------------------------ 09:17am EST 15-Jan-98 Needham & Co. (Sandy Harrison 212 371 8300) ALSC ALSC REPORTED SIGNIFICANTLY LOWER THAN EXPECTED REV OF $24.8MM; MAINTAIN HOLD. Needham & Company, Inc. Sandy Harrison January 15, 1998 (212)371-8300 harrison@needhamco.com Summary While gross margins for the December quarter, excluding inventory reserve, were below our estimate of 18%, they did show sequential growth to 17.1% from 11.8% in the September quarter. Going forward, we expect gross margins to continue to improve sequentially as the overall Company ASP and product mix improves. Alliance delivered an operating EPS of ($0.06) cents per share, versus our operating EPS estimate of ($0.02), on significantly lower than expected revenues of $24.8 million for FQ398 (December). The operating EPS loss excluded a pre-tax charge of $5.8 million taken to write down existing DRAM inventory to reflect the lower current market value. Also excluded from the results were after tax contributions of $3.8 million or approximately $0.10 in EPS from the Company's 19% equity share in its joint venture fab, United Semiconductor Corporation (USC). With the USC contribution, EPS would have been $0.04. Going forward, we expect the Company's revenues to increase sequentially as its graphic products, which have higher ASPs, contribute a greater percentage to revenues. Going forward, the Company has an aggressive plan to expand its product mix to include more revenues from its newer, higher ASP graphics products. Revenue breakout by product was as follows: SRAMs 36% (vs. 31% in the September 1997 quarter), DRAMs 50% (62%), graphics 14% (6%) and Flash less than 1%. By shifting the mix toward more value-added graphics products versus commodity DRAMs, we believe revenues and gross profit should benefit materially. Revenue contribution from the Company's new products continued to increase, representing 80% of revenues, versus 60% during the September quarter. Revenues from new products are expected to continue to show sequential growth going forward as graphics, SRAM, and Flash products play a larger role. Approximately 70% of revenues came from sales to the PC market versus 25% from the non-PC market, which improved from the 75/25 split experienced in the September quarter. The geographic revenue breakout was as follows: Domestic 55% (versus 63% in the June quarter), Taiwan 18% (17%), Europe 17% (8%), and Other 10% (12%). While gross margins for the December quarter, excluding the inventory reserve, were below our estimate of 18%, they did show sequential growth to 17.1% from 11.8%. Going forward, we expect gross margins to continue to improve as the Company transitions its product mix to incorporate newer products with higher margins. Visibility is expected to remain limited in the near term, with turns business in the December quarter estimated to have represented between 50-60% of revenues and turns business is expected to continue to represent a large percentage of revenues. However, The Company's book to bill was at or slightly above unity for the December quarter, improving backlog and giving the indication visibility could potentially improve in the March quarter.

To: DJBEINO who wrote (2338)	1/16/1998 5:43:00 AM
From: MoonBrother	Read Replies (4) \| Respond to of 9582

DLJ's comments ----------------------- 07:32am EST 15-Jan-98 DLJ Securities (Krishna Shankar) ALSC ALLIANCE SEMICONDUCTOR: Third Quarter, Fiscal 1998 DLJ **** DONALDSON, LUFKIN & JENRETTE **** DLJ January 15, 1998 Krishna Shankar (415) 249-2231 Christian Alexander (415) 249-2236 Results were depressed by a $0.10 per share write down of inventory: For the third quarter, fiscal 1998 Alliance reported $24.8 million in revenue and a loss of $0.06 per share versus $25.2 million and a loss of $0.03 per share last year and $29.0 million and a $0.12 per share in the prior quarter. The company, which had earlier pre-announced that operating results would be depressed by weakness in DRAM prices, took the opportunity to write down inventory ($5.8 million was charged to COGS). The weak operating results and write downs were to some extent offset by the $3.8 million contribution to earnings from the company's pro rata share of profits in the USC foundry joint venture in Taiwan. Pro forma results, excluding the inventory write down would be $0.04 per share at a 17% gross margin. Reducing estimates: The company has embarked on a strategy of product, market and customer diversification which will lead to gradual more consistent earnings growth and expects to enter the flash market in the coming quarter with both 4Mb and 8Mb parts to complement its presence in DRAM and SRAM. In addition the company is attempting to re-shift its product mix back towards SRAM and graphics, were pricing has been more favorable than in standard DRAM. We believe that the weakness in DRAM will continue to hurt results and that the transition back to SRAM will be gradual. We are lowering our FY98 revenue estimates from $130 million and a loss of $0.05 per share to $116 million and a loss of $0.14 per share to reflect the gradual ramp of non-PC SRAM and graphics and the persistent pricing pressures in DRAM. For 1999 we are also cutting our estimates from $199 million and $0.60 per share to $162 million and $0.40 per share, respectively. Our 12-18 month target price of $8 is based on a 20 times multiple of recovering earnings in fiscal 1999 of $0.40 per share and a secular EPS growth rate of 20% per year. IMPORTANT POINTS For the quarter revenues by product line were: DRAM 50%, SRAM 36%, Graphics products 14%, Flash less than 1%. The corresponding revenue mix for the prior second quarter, FY98 was: DRAM 63%, SRAM 30%, Graphics products 6% and Flash less than 1%. By region, the revenue mix was US (55%), SE Asia (18%), Europe (17%) and ROW (10%). The company plans to target a revenue mix of: 40% DRAM, 40% SRAM, 15% Graphics and 5% Flash. We believe that SRAM prices will continue to be somewhat more stable. On the positive front, Alliance's investment in USC is contributing well to net income and virtually assures the company access to leading edge capacity. The company has started development on 0.25 micron memory. ALSC may offer long-term, small-cap value investors with some upside due to the company's product and market diversification strategy. Long-term upside exists with embedded memory PC graphics/multimedia chips, high-speed 0.35 micron 4Mb/16Mb DRAMs, and flash memory. We expect that in fiscal 1999, ALSC's revenues will move toward a better balance, as follows: high- speed/high-density 1Mb & 4Mb SRAM's (32%), high-speed 4Mb/16Mb DRAMs (55%), PC graphics/multimedia (10%), 1Mb/2Mb/4Mb flash memory (3%).