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Technology Stocks : Dupont Photomasks (DPMI) -- Ignore unavailable to you. Want to Upgrade?

To: JMD who wrote (380)	3/17/1998 12:58:00 AM
From: jeffbas	Read Replies (1) \| Respond to of 955

Mike, very interesting post from several points of view. 1. If there is little need to build new fabs because of increased output from existing wafer production, that is bad news for everyone in the semi-equipment business who does not have a primary focus on smaller feature sizes. Anyone in the neighborhood may have valuation trouble in the market thru guilt by association, including DPMI (which has plenty of standard feature size business which probably is not doing anything much). (DPMI will not escape unscathed a downdraft in the semi-equipment sector.) 2. On the face of it, this trend toward more complex chips with smaller feature sizes (requiring more masks), the rapidly increasing price of masks as sizes get smaller, and what appears to be DPMI's leadership position at the high end, would seem to be extremely favorable to DPMI, both absolutely and competitively. On the other hand, I am skeptical that the Street's average estimate for the quarter of $.49 will be met. I think we will have possibly the maximum effect of Asia this quarter. I believe depreciation charges with respect to new facilities will rise; and if there is a gradual ramp up filling the capacity, operating costs will not be covered by the sales developed. I do not consider myself especially knowledgeable on these issues, but common sense tells me that the odds are considerably more than 50-50 that a few cents reduction from last quarter is not enough. Considering there was mildly positive news, the stock performed quite poorly today. I am playing it to expect some kind of an earnings disappointment. If so, the stock will not make a new high short term and if it does go up a few points, it will come back down on the news I am looking for. Therefore, there is no reason to buy it now (as an individual investor) no matter how great the intermediate and longer term looks. Much as I would hate to see it pull back 15 out of the 22 point rally off the lows, since not selling what I have at $47 is then proved to be a serious error, I could see it happening - and would be a major buyer in the low 30's.