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To: Tech Master who wrote (15100)	7/29/1998 5:55:00 PM
From: Andrew Vance	Read Replies (1) \| Respond to of 17305

AV--Took profits on DPMI myself and exited PLAB net zero in order to buy back DPMI. I listened to the conference call and got out at a high point before the negativity set in. The interesting stuff from the conference call was not what was said but what could be inferred by looking between the lines of comment. 1. ASPs and Units down due to marginal decrease in design activity. 2. Concentrating on Customer Service and beating on time delivery expectations. 3. Low volumes of 0.25u and below reticles sets. 4. Low % of work is in DUV, OPC, PSM right now. 5. Yields on the advanced reticles are not what is desirable and needs to be improved. 6. Korean operations are improving slightly with a risk sharing on currency exchanges. Just using these comments, let me tell you what wasn't said. 1. ASPs lower because there are less premiums being paid for fast turn reticles relative to prototyping. With enough capacity, product turn around is short enough that end user is saving on premiums. 2. Units volume down because we are in the historical Summer duldroms for the mask makers and because prototyping activity is down slightly. 3. Major customers like MU, TXN, and MOT are in a state of flux as businesses are re-aligned or as acquisition chaos is sorted out. Both of these can change in a blink of an eye to generate better ASPs and volume shipments. After Labor Day, I would expect to see a big pick up in these areas. Espcially now that INTC is moving ahead with the 0.18u procecessor. This look into the 0.18u process has a great deal of influence on the next set of comments. 4. The low yields on the advanced reticles are factored into the price of these reticles such that most yield and scrap issues and costs are being paid for by the end user. As the yields and manufacturability of these plates improve, the ASPs for these plates will not immediately be reduced. you can expect 2-4 quarters of what I would consider WINDFALL profits on these plates until the next round of pricing negotiations occur or they are beat up bloody by the end user. 5. With such a small percentage of their business in the advanced reticles and designs, there is room for dramatic improvements in ASPs, margins, etal. as these come on board. make no mistake about it, all the "lost earnings" caused by the industry downturn will be made back in the early part of the recovery within the industry. 6. While PLAB has placed its new facility on hold and can handle its customer requirements within the exiting facilities, DPMI is still moving forward on its expnasion. This means that in a recovery, DPMI might be able to steal some marketshare at comanies where both DPMI and PLAB are utilized and primary and secondary suppliers. 7. The Korean mask facility is only going to bear 1/2 of the financial burden of the currency fluctuations but they are also going to manufacture plates for export from this same facility. Cost of making these plates is extremely cost competitive and will garner larger profits as they are sold to outside markets. Exported plates from Korea may offset DPMI's part of the currency fluctuations. 8. DPMI held its own during these trying times and forsees a flat upcoming quarter, which admittedly is their slowest quarter. They are primed to come out of this downturn extremely strong. Andrew DPMI-long term investment from this point on with a 2 year target of $50.