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Technology Stocks : MEMC INT'L. (WFR -NYSE) The Sleeping Giant? -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (3433)	6/7/1998 1:54:00 PM
From: Scotsman	Read Replies (1) \| Respond to of 4697

I think we pretty much all know that this stock is effectively dead money for the next 12 to 18 months. But its future potential is super, and it should pay off very handsomely in the long run. I guess my question is during this 12 to 18 month period will it drop farther. Will it hit single digits? Will it survive?( of course I think it will, but contrary opinions would be welcome.)

To: Zeev Hed who wrote (3433)	6/7/1998 7:43:00 PM
From: Carl R.	Read Replies (1) \| Respond to of 4697

Lets try a different way. If MEMC has about a third of the worldwide market, and their sales were about $1B for the last year, then the the worldwide sales of raw wafers is about $3B, give or take. If the first reference is correct and total annual wafer starts worldwide is about 158 million for all wafers then that implies the average cost per raw wafer would be about $20. Does this make sense? If you assume that the first reference is correct in order of magnitude, but out of date in terms of optimism, then presumably it is the kind of forecast that MEMC and their competitors were looking at when they began their over-expansion. Note that sales of <150 wafers have plunged, and unless capacity has been taken off line, there must be overcapacity in the small wafers that continues to worsen. For the smaller wafers, presumably only the low cost producer can make money in the small wafers. I ask again, is MEMC a low cost producer? In other words, is MEMC losing money while the competition breaks even, or conversely are the others bleeding worse than MEMC? In 150mm wafers the demand for wafers is constant, and has been for awhile. Both references agree that with this. Thus presumably there was no overexpansion here, and prices continue to be a bit more reasonable. In 200mm wafers both references agree that the demand will steadily grow, but disagree as to the rate. The first reference shows a doubling between now and 2002, while the second shows a 50% growth rate by 2003, a much smaller rate of growth. Taking a wild stab at it, if there is 25% excess capacity, then it will take until mid-1999 to absorb it under the first projection, and until 2001 under the second scenario. Under both it is fairly clear that 300mm wafers will not be the saviour, so the only questions are how long it will take to equalize supply and demand at 200mm, who is the low cost producer, and who has the most/least staying power. My guess based on this would be that supply/demand will not equalize until late 1999. As for costs, I have no idea. Carl