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Technology Stocks : MEMC INT'L. (WFR -NYSE) The Sleeping Giant? -- Ignore unavailable to you. Want to Upgrade?

To: Jonathan Edwards who wrote (3800)	9/16/1998 7:22:00 AM
From: Chip Roos	Read Replies (1) \| Respond to of 4697

<<MEMC warns of more red ink Wednesday, September 16, 1998 By Virginia Baldwin Hick Of the Post-Dispatch Bad news continues in the semiconductor industry, and it continues to trickle down to suppliers like MEMC Electronic Materials Inc., the world's second-largest maker of silicon wafers. MEMC, based in O'Fallon, Mo., said Tuesday that its third-quarter loss would be greater than expected, and that it will continue to shut down production for a few days here and there to cut costs and reduce supply. MEMC's wafers are made into silicon chips, which are the base for microprocessors used in computers, microwaves, cars, cellular phones, digital cameras, "smart" credit cards and a host of products that consumers take for granted. Because of the continuing financial crisis in Asia, particularly the recession in Japan, worldwide demand is down for such products. "This is more of a volume- or demand-driven impact," said Sam Duggan, MEMC spokesman. "We don't think we've lost market share." Prices have softened, mostly because of pressure from manufacturers of chips and devices that use chips. Intel Corp., for instance, cut prices this week on some of its microprocessors. That price cut may spur demand for computers, and eventually for silicon wafers. But in the short run, cuts like Intel's pressure companies like MEMC to offer price breaks to their customers. MEMC employs about 1,900 people in O'Fallon, including 1,500 in its wafer plant there. Most plant workers took a four-day Labor Day holiday this month, with the option of counting the extra days as vacation. Such short-term shutdowns will continue at MEMC plants around the world, Duggan said. MEMC employs 6,800 worldwide, but not all will be affected by plant shutdowns. Duggan said not all shutdowns would be keyed to local holidays, but he said he expected similar extended holidays around Thanksgiving and Christmas and perhaps other events around the world. "We're trying to better manage current capacity with anticipated demand," he said. A company statement released late Tuesday said MEMC expects sales in the third quarter to be between $160 million and $165 million, because of lower product volume and prices. Revenue in the second quarter was $202 million, and that was down 17 percent from last year's second quarter. MEMC will report third-quarter results Oct. 26. MEMC also announced that its "negative margin" would be in the mid- to high teens, which could translate into an operating loss of about $30 million. The loss could be much higher when other costs are figured in. Michael Ferguson, an analyst with Pauli & Co. in Clayton who follows MEMC, said the loss might be greater than $50 million. In the second quarter, MEMC took a $147 million loss, including more than $105 million in restructuring costs. Ferguson has had a "hold" rating on MEMC's stock since last October. "It's been nearly a year," he said. "I was hoping to see light at the end of the tunnel. "I think the steps they're taking will position them well when the market turns," Ferguson continued. "I would prefer they were in better shape from a demand standpoint, but it's not something in their control. They can't just switch and make something else.'' Tuesday's announcement came after the stock market closed. MEMC closed at $5.75, up 13 cents, but is down 62 percent so far this year. Copyright (c) 1998, St. Louis Post-Dispatch>>