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Technology Stocks : SmartFlex Systems (SFLX) - Blitzkrieg or Sitzkrieg? -- Ignore unavailable to you. Want to Upgrade?

To: Joe Dancy who wrote (690)	7/18/1998 9:28:00 AM
From: Joe Dancy	Read Replies (1) \| Respond to of 848

My take on conference call, only a draft: *** SMARTFLEX SYSTEMS (SFLX) SLFX announced second quarter results on July 13th, earning six cents a share which exceeded analyst estimates on revenues that declined by 27%. The company noted that the hard disk drive (HDD) data storage industry - one of the major sectors that SFLX serves as a contract manufacturer - is continuing to experience reduce demand, excess investory, and cost pressures, with no improvement apparent in the foreseeable future. The company is working on 15 new projects - the most in quite some time - and customers are increasingly implementing a build to order system which makes backlogs less indicative of future business and makes it more difficult for SFLX to project future demand. The company is expanding the Cebu facility and has excess capacity at their Mexico facility, and the cost reduction program they implemented has been implemented which allowed them to post positive earnings in a business environment which is far from ideal. The company has moved the breakeven point downward, but said that they are well positioned to handle any rebound in demand. The company has a strong balance sheet with $4.72 of cash per share (the stock is trading at $__), and no borrowing against its' $25 million line of credit. The company announced some interesting developments with regard to corporate strategy and positioning. Management announced that the will aggressively develop their electronic contract manufactuing services to a broader market and provide engineering, technical, and design services. The company plans on adding technical capabilities and broadening the marketing focus and team. To this extent, they will try to change and reposition themselves, possibly by a merger or acquisition strategy. In response to a question about using cash to buy back shares, management made a point the the Board of Directors regulary reviews that option - but prefers to use the cash in other ways to add value, then noted that in a merger or acquisition a buyback of treasury stock would not allow for a "pooling of interests" type of accounting treatment. The company said that they would like to enter the market to provide services to the medical and telecom markets - and these sectors generally need more design and engineering work versus HDD customers. *** Joe