To: Carl R. who wrote (3440 ) 6/7/1998 9:19:00 PM From: Zeev Hed Read Replies (2) | Respond to
Carl, I am still of the opinion that $100 is possible in 30 months. Their sales are still growing, and actually shipment have been growing nicely (but pricing pressures were heavy). The $29 MM loss includes additional $8 in R&D, $8 in write off for staff reductions, $8 MM or so in currency losses due to meltdown of Asian currencies (they have facilities in Korea and Malaysia were large currency losses were taken). On top of that they have taken another close to $10 in losses in joint ventures. These should now be fully operational, and while the $16 MM in R&D and write off's can still be expected this quarter (they have a continuation of their early retirement program), I do not expect currency losses nor such large losses in joint ventures. I would say the current quarter is lossy, the quarter after that break even and they start and make profits in the first quarter of 1999. I would guess that for all 1999 they make about $30 MM, and for 2000 they make closer to $80 MM (or $2/share). At this time, I expect tightness in the wafer business due to the semis having a 20% increase in sales (Some forecasts call for $175 Billions sales during 1999 for the chips sector and more than $200 Billion in 2000, since this year's forecasts of $142 Billions has been scaled down to about $135 billions or a decline from 1997's 137 billions, this forecast might be on the optimistic side), or about 25% increase in Si real estate. During 2000, however people are going to look at possible WFR's sales of $1.8 to $1.9 billion for 2001 and profits of between $130 MM to $150 MM (and some forecasts in excess of $200 MM since analysts become "overoptimistic"), we are looking at around $4/share in 2001 which I still believe that in a strong semi market in 2000 will translate to 25 PE on next year's (2001) earnings thus prices for WFR reaching $100/share. If the semi recession takes longer, that means that the Asian depression spread to the rest of the world and than we will have nowhere to hide. (VBG). Right now, I still think that the source of liquidity available within the Japanese system will be used to prevent such a calamity.
