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Technology Stocks : Alliance Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: DJBEINO who wrote (3662)	7/21/1998 7:04:00 PM
From: MoonBrother	Read Replies (3) \| Respond to of 9582

Lehman's pre-earning comments made this morning. Looks like Mr. Gumport will adjust his position tomorrow morning to issue a worse comment. Keep our finger crossed. --------------------------------- 07:35am EDT 21-Jul-98 Lehman Brothers (M. A. Gumport, CFA 1(212)526-5368) ALSC Alliance Semiconductor: Expect EPS Post-Close Tonight; More Restructuring Ticker : ALSC Rank(Old): 2-Outperform Rank(New): 2-Outperform Price : $3 1/4 52wk Range: $15 3/4-2 1/4 Price Target (Old): $9 Today's Date : 07/21/98 (New): $9 Fiscal Year : MAR ------------------------------------------------------------------------------ EPS 1998 1999 2000 2001 QTR. Actual Old New Old New Old New 1st: 0.03A -0.01EX -0.01EX 0.02E 0.02E 0.10E 0.10E 2nd: -0.12A@ -0.01E -0.01E 0.05E 0.05E 0.12E 0.12E 3rd: -0.06A@ -0.01E -0.01E 0.08E 0.08E 0.13E 0.13E 4th: 0.00A@ -0.01E -0.01E 0.10E 0.10E 0.15E 0.15E ----------------------------------------------------------------------------- Year:$ -0.15A@ $-0.04EX $-0.04EX $ 0.25E $ 0.25E $ 0.50E 0.50E Street Est.: $ -0.03E $-0.03E $ 0.26E $ 0.26E $ 0.50E $ 0.50E @-Includes: Inv. adj. fiscal 2Q98/fiscal 3Q98 $-0.10, fiscal 4Q98 $-0.09A. X-Excludes: fiscal 1Q99 $+0.26E gain from sale of JV interest and $-0.19 inv. adj. ----------------------------------------------------------------------------- Price: $3 1/4 Revenue (FY99E): $ 62.0 Mil. Return On Equity (97): -2.8 % Proj. 5yr EPS Grth: NM Shares Outstanding: 40.0 Mil. Dividend Yield: 0.0 % Mkt Capitalization: $130.0 Mil. P/E FY99; FY00: NM; 13.0x Book; Price/Book:$5.05/sh; 0.51X Convertible: None Net Cash per Share: $0.22 Disclosure(s): G,C ----------------------------------------------------------------------------- EPS DUE POST-CLOSE TONIGHT (7/21); NO GOOD NEWS LIKELY ON CURRENT FUNDAMENTALS; EXPECT EPS AT $-0.01 BEFORE WRITE-DOWNS AND STOCK SALE PROFITS ($+$0.06 BOTTOM LINE). LIKELY FURTHER ACTIONS TO CUT COSTS WILL INCLUDE CLOSING SELECTED OPERATIONS. VALUE STORY STILL VALID. SEE EASILY $5-6 OF VALUE BASED ON EQUITY IN JOINT VENTURES. STOCK WILL HAVE TROUBLE APPRECIATING, HOWEVER, UNTIL MOMENTUM TURNS BETTER OR JOINT VENTURE (JV) SHARES ARE SOLD. ** 2 MAINTAINED. WE DON'T SEE A LARGE, SUSTAINABLE MOVE UNTIL DRAMs TURN. WE STILL THINK THAT TURN WILL COME IN THE SEPTEMBER-APRIL TIME FRAME (NOT YET). ----------------------------------------------------------------------------- EPS DUE POST-CLOSE TONIGHT; NO GOOD NEWS LIKELY IN THE NUMBERS; STILL EXPECT $-0.11 FROM OPERATIONS BEFORE: $+0.10 FROM JV, $+0.26 PROFIT ON SALE OF JV INTEREST, AND $-0.19 INVENTORY WRITE-DOWN (i.e., $+0.06 bottom line). Alliance Semiconductor should end June fiscal 1Q99 with $10 mil. of cash and should end July with about $25 mil. in cash (reflecting tax refunds), but focus on DRAMs should push sales down nearly 50% from March fiscal 4Q98. We would not be surprised by moves to take substantial actions to cut costs (including a potential scale back of their graphics accelerator effort, now likely costing over $4 mil. per year). VALUE STORY RECAP: ALLIANCE'S JV AND OTHER EQUITY PARTNERSHIPS WORTH EASILY $5-6 PER SHARE.. 3/20 Alliance announced a deal to sell 18% (35 mil. shares) of their interest in United Semiconductor Corp. ("USC," a JV with United Microelectronics "UMC" and S3) at 30NT to partner UMC. At the time, the exchange rate was 32.0NT per dollar (now 34.3NT per dollar). Alliance receives 30NT per share plus up to 19NT upon the occurrence of a "liquidity event" (i.e. if USC is taken public, Alliance receives 50% of any premium above 30NT up to 68NT). Alliance paid 10.90NT for each of its roughly 190 mil. shares in USC. Alliance still has 155 mil. shares in USC plus an investment of $74 mil. in 2 other foundry partnerships. At 30NT, just the remaining 155 mil. share interest in USC is worth $3.40 cash per Alliance share pretax. At 60NT, Alliance's USC shares are worth $6.80 per share pretax. We value Alliance's additional $74 mil. investment in other foundries at $3.00 per share. Alliance's future tax liability is unclear. $9 1-YEAR TARGET MAINTAINED; A STORY FOR VALUE PLAYERS, NOT MOMENTUM PLAYERS, AND PROBABLY NOT FOR TODAY. Based on Alliance's JV interests, we see bedrock value of $5 per share and believe $9 is an attainable 1-year target. That said, we see no positive current momentum. We doubt the stock will move until some sign of better business trends emerge. In that regard, we continue to believe there is a reasonably good chance DRAM prices improve at some point in the October-April timeframe due to capacity cutbacks and ongoing demand growth. That fundamental improvement, however, is not currently visible. ---ALSC's Cash Outlays For JVs ($ mil.)-- -Cash- -TOTAL- Return Pre-1996 1/96 7/96 7/97 3/98 -COST-- 3/98 UMC/JV1 (USC) $ 36 $ 0 $ 17 $ 17 $ 0 $ 70 $33 UMC/JV3 (USI) $ 0 $ 14 $ 0 $ 0 $ 8* $ 22 Chartered $ 35 $ 16 $ 0 $ 0 $ 0 $ 52 TOTAL $ 71 $ 30 $ 17 $ 17 $ 8 $144 *Optional; affects equity ownership on pro rata basis. ------06/30/97--- ----06/30/98----------------------- ALSC FY1Q ----------------- --LB EST- --Actual---------- vs. -$Mil.- --Ratio-- ---$Mil.- --$Mil.-- --Ratio- Est. Sales (ratio: % ch.) $ 36.3 -45.5 % $ 15.0 $ --.- ---.- % $--.- SRAM $ 9.4 $ 8.8 $ --.- 1 Mbit $ 3.2 $ 5.3 $ --.- 256k $ 2.5 $ 0.0 $ --.- Other $ 3.7 $ 3.5 $ --.- DRAM $ 25.1 $ 5.0 $ --.- Graphics $ 1.8 $ 0.4 $ --.- Flash $ 0.0 $ 0.4 $ --.- Other $ 0.0 $ 0.4 $ --.- CGS (r.: % of sales) $(28.8) ( 79.2)% $( 12.3) $( --.-) --.- % R&D (r.: % of sales) $( 4.1) ( 11.3)% $( 4.3) $( --.-) --.- % SG&A (r.:% of sales) $( 4.1) ( 11.2)% $( 4.6) $( --.-) --.- % EBITD (r.: margin) $( 0.6) ( 1.7)% $( 6.2) $( --.-) --.- % $--.- Dep. (r.:% of sales) $( 0.8) ( 2.3)% $( 1.1) $( --.-) --.- % Other (r.: % of sales)$ 0.2 0.5 % $ 0.0 $ --.- --.- % Nonrec(r.:% sales)-1 $( -.-) ( -.-)% $ 5.0 $ --.- --.- % Pretax (r.: margin) $( 1.2) ( 3.4)% $( 2.3) $ --.- --.- % Tax (r.: tax rate) $ 0.4 35.0 % $ 0.9 $ --.- --.- % Net (r.: margin) $( 0.8) ( 2.2)% $( 1.4) $ --.- --.- % Equity Invt. (% sales)$ 1.9 5.3 % $ 3.9 $ --.- --.- % EPS (r.: % ch.) $ 0.03 111.5 % $ 0.06 $ -.-- --.- % Shares (r.: % ch.) 41.0 6.8 % 43.0 --.- -.- % 1- fiscal 1Q99 estimate includes $+17e mil gain from sale of JV interest ($+0.26e) and $-12e mil inv. adj. loss ($-0.19) in addition to $+0.10 JV equity interest.