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Technology Stocks : Oak Technology (OAKT) -- Ignore unavailable to you. Want to Upgrade?

To: P.M.Freedman who wrote (3858)	1/23/1998 9:50:00 AM
From: Michael H. Dragon	Respond to of 4335

Why would people give their shares away at the open?We"ll probably close up for the day. Mike

To: P.M.Freedman who wrote (3858)	1/23/1998 10:29:00 AM
From: jim detwiler	Respond to of 4335

analyst maintains buy Source: MarketMax Company: Oak Technology, Inc. (OAKT) is the market share leader in CD-ROM controller chips, with an estimated 60% share in the CD-ROM controller market. During the December quarter, CD-ROM controllers accounted for approximately 80% of total revenue; PC audio and graphics less than 5%; and the remaining balance split between MPEG decoders and Pixel Magic (JPEG codecs and imaging DSPs). Estimates Q1 Q2 Q3 Q4 F Y Curr. `98 EPS 0.11a 0.11a (0.01)e 0.03e 0.23e Curr. `99 EPS 0.05e 0.06e 0.07e 0.07e 0.25e Prev. `98 EPS 0.11a 0.12e 0.12e 0.15e 0.50e Prev. `99 EPS 0.16e 0.19e 0.17e 0.19e 0.70e 52 wk Hi-Lo: $16 - $6 Market Cap: $279 mil P/E C98; C99: 50x; 16x Mkt Cap/Rev: 1.6x C98-99 Rev Y/Y: 24% Book Value: $5.97/sh C98-99 EPS Y/Y: 210% Cash per Sh: $3.12/sh * Recommendation: OAKT is currently trading near its historic lows and the company has over $3.00 in cash. Although 1H of CY98 is expected to be difficult for most fabless multimedia companies due to seasonal softness and Asian currency devaluation, we anticipate a recovery for Oak beginning in the June quarter. Although we are not expecting any near term appreciation we are maintaining a Buy rating on valuation. * OAKT reported Q2'FY98 EPS of $0.18 on $49.4 million in revenue. Excluding a gain of $0.07 EPS attributed to a favorable legal settlement, the company would have reported $0.11 EPS which was essentially in-line with our $0.12 EPS on revenue of $48 million. * The company also announced plans to divest its audio and graphics business units (5% of sales, but 20% of expenses). We view this as a long term positive for OAKT as the company can now spend needed resources on extending its market leadership in the optical drive decoder markets as well as explore new opportunities in the consumer electronics market. * Despite good unit demand, greater than normal price erosion impacted the quarter driven by aggressive pricing from two Taiwan competitors (UMC and Winbond), who price their chips in NT$. In addition, the company continued to show little product diversification improvements as over 80% of revenues were generated from sales of CD-ROM decoder chips. * We are lowering our estimates as we anticipate OAKT's sales for the March quarter will be down 23%. This is due to reduced contribution from discontinued graphics and audio chip business units, seasonal softness in CD-ROM controller sales and continued pricing pressure in view of the sub-$1,000 PC growth and weak Taiwan currency. Our March quarter estimate is now a loss of $0.01 per share on $38 million in revenue compared to our previous estimate of $0.12 on revenue of $50 million. * The key metric for OAKT's recovery will be a strong ramp in the company's integrated OTI-9325 CD-ROM controller chip which combines three discretes (DSP, servo, controller) onto a single chip and sells for over 2X the price of the company's current block decoder chip. We do not expect this product to begin ramping until late in the June quarter. Notes: a) Hambrecht & Quist LLC maintains a market in these stocks. b) Hambrecht & Quist LLC has been an underwriting manager, co-manager, or has privately placed securities of these companies within the last three years. d) A Hambrecht & Quist LLC employee is a director of these firms. f) Options are available on these companies.