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Technology Stocks : VLSI Technology - Waiting for good news from NASDAQ !!! -- Ignore unavailable to you. Want to Upgrade?

To: Doug who wrote (3804)	7/6/1998 4:27:00 PM
From: DanZ	Respond to of 6565

Doug, I don't work for VLSI and have little insight into what is going on with their personnel. A VLSI employee who posted on the Yahoo VLSI thread said they are not laying off engineers and actually have some vacancies. He said that the hiring freeze and layoffs were for non-technical personnel (could mean administration, clerical, and management). There's no way to tell if he actually works for VLSI or if what he said is true so take it for what it's worth. BTW, do you have a position in VLSI? I can't remember from your earlier posts. Dan

To: Doug who wrote (3804)	7/6/1998 11:17:00 PM
From: DanZ	Read Replies (3) \| Respond to of 6565

I prepared a proforma income statement but didn't have time to post it earlier today. Based on my proforma, I think VLSI will beat the estimate of 9 cents if revenues come in at about $140 million. Here's my rationale. Revenue: Guidance from management indicates that revenue will be between $138 million and $143 million this quarter. I used $140 million in the proforma which is about equal to what they did last quarter. Cost of Goods sold: COGS averaged 57.2% of sales in the past five quarters although it was 58.7% last quarter. As is expected due to economies of scale, COGS declined to 55.3% and 54.9% during the September 97 and December 97 quarters respectively while revenues were $181 million and $193 million. I used 58.7% in the proforma which is equal to last quarter since I'm expecting revenues to be about equal to last quarter. General & Administrative expense: G&A averaged 16% of sales in the four quarters prior to the March quarter and was 18.6% in the March quarter. G&A was a relatively constant percentage of sales until last quarter (16.3%, 16.6%, 15.9%, 15.3%, and 18.6% in the past five quarters). The increase in March was probably due to a revenue shortfall that caught the company off guard and they didn't reduce expenses until it was too late. However, management stated a few months ago that they intend to reduce expenses and G&A is the most likely place to do it. I used 17.5% of sales in my proforma, which is below last quarter but still above the average of the four quarters prior to March. This is conservative in my judgement as I think they could have reduced G&A to 16.5% of sales. Every 0.5% change in G&A as a percentage of sales affects the EPS by about 1 cent. Research & Development expense: R&D has averaged 15.0% of sales in the past five quarters although it was much higher in the March quarter. This is because revenues were $50 million lower than the December quarter and again, I think this caught the company by surprise. R&D as a percentage of sales for the past five quarters has been 14.3%, 13.3%, 13.7%, 13.9%, 19.8% respectively. The average over the five quarters was 15.0% and I used 19.0% for the proforma. This would put R&D expense at about the same dollar level as the December 97 quarter. Every 0.5% change in R&D as a percentage of sales affects the EPS by about 1 cent. Other revenue and interest expense. Other revenue has averaged 2.1% of sales over the past five quarters and was 2.7% of sales in the March quarter. Interest expense has averaged 2.5% of sales over the past five quarters and was 2.5% in the March quarter. I used the numbers from last quarter in the proforma. These numbers have been very stable over the past five quarters and I see no reason for them to change significantly. Earnings before taxes: Based on the estimates described in this proforma income statement, VLSI's EBT would be $7.0 million. Income tax: VLSI was in the 27% tax bracket last quarter and I assumed that they would stay there. This would make their income tax $1.89 million Net income: Based on the estimates in this proforma, VLSI's net income would be $5.11 million Shares outstanding: The company had 47.415 million fully diluted shares outstanding as of March 98. I used 48.0 million to arrive at the EPS; the increase allows for stock options given to employees in the June quarter. Earnings per share: Based on the estimates described in this proforma, VLSI would earn 10.6 cents in the June quarter, or 1.6 cents above the consensus estimate. They would earn 11.7 cents if G&A is 17.0% of sales and the other estimates remain constant and 12.8 cents if G&A declines closer to the average of 16.5% of sales and all other estimates remain constant. I'm certainly open to other estimates or criticism of this proforma. Please send me your projections (with rationale) and I will plug them into my spreadsheet and post the results. First Call has a mean of 9 cents with a range of 5 cents to 10 cents so my estimate is slightly above the highest analyst surveyed by First Call. Dan