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

To: joemjo who wrote (303)	2/21/1998 8:32:00 PM
From: Scott D.	Respond to of 329

Here are some quotes from the reactions of Cowen, and Montgomery: CMCI/ DIAMOND TURNKEY WIN SHOWS RESILIENCE FOLLOWING LOSS OF MICRON; NEUTRAL 08:22am EST 19-Feb-98 Cowen & Co. (STONE, ROB 617-946-3932) CMCI Key Points: 1. Q2 EPS Of 17> (vs. 13>) On Strong Contribution From Micron, 1> Below Consensus 2. Selection By DIMD For Turnkey Should Up Annual Account Volume More Than 2X To $100MM+ 3. Mexico Plant On Track For Q4 (July) Volume; Three Accounts Earmarked To Move Production Maintaining Neutral (3) On Continuing Concerns About Customer Concentration -- CMCI is well-positioned among the second-tier ECMs, and management is executing well. It has largely disengaged from unprofitable and end-of-life customer relationships, has built marketing and technical skills, and is expanding the customer base and high-speed SMT capacity. Volatility in the account base represents one of the greatest risks for second-tier ECMs. While the recent loss of Micron was a major setback, the quick bounce back with an expanded DIMD relationship is encouraging. Nevertheless, CMCI has replaced dependence on one large account with another, albeit smaller one, as DIMD is projected to be 25-30% of sales, vs. Micron which was 35-40% in the last few quarters. Street estimates are likely going up, which could create a trading buy opportunity. At 15X C98, the valuation is reasonable, and the potential for more new account wins could add upside. But with customer concentration a risk, we would look for better diversification among top OEMs as a criterion for upgrade. CMCI: Reports Q2; DIMD Becomes a Signifigant Client; Increasing Est 11:03am EST 19-Feb-98 Montgomery Securities (J. Lin 415 627-2049) CMCI NATIONSBANC MONTGOMERY**NATIONSBANC MONTGOMERY*NATIONSBANC MONTGOMERY CMC INDUSTRIES RATING: BUY February 19, 1998 First Call CONTRACT MANUFACTURING NASDAQ: CMCI Jeffrey W. Lin (415) 627-2049 DJIA: 8451 Yesterday, after the close, CMCI reported Q2 (Jan) EPS of $0.17, below our $0.20 EPS estimate and versus $0.13 in the previous year. Revenues of $88 million fell short of our $95 million forecast. CMCI's revenues fell short primarily because its terminated manufacturing relationship with Micron Electronics ramped down faster than expected. Strengthening Relationship With Diamond Multimedia On a positive note, CMCI announced an agreement to manufacture products for Diamond Multimedia. Prior to the announcement, CMCI was building products for Diamond; however, this agreement strengthens its relationship with Diamond. CMCI will convert its current business with Diamond from consignment to turnkey (lower margin, but much higher revenue). The expected run rate of this opportunity is approximately $100 million annually (approximately twice the current run rate) and should begin to ramp in the month of April. We believe Diamond is using CMCI to support major Tier 1 PC OEMs and believe this is also a positive sign for Diamond's OEM business. Increased Estimates and Price Target. We have increased our FY 1998 (July) revenue and EPS estimates from $321 million to $326 million and $0.53 to $0.58, respectively. We have also increased our FY 1999 revenue and EPS estimates from $346 million to $375 million and $0.58 to $0.73, respectively. Continue to Rate CMCI BUY