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Technology Stocks : Semtech (Nasdaq:SMTC) -- Ignore unavailable to you. Want to Upgrade?

To: John Morrison who wrote (653)	11/18/1998 12:23:00 AM
From: Jeff Bond	Read Replies (1) \| Respond to of 1225

I'm thinking a good portion of summer revenue will hit the books this quarter: 1. At the beginning of Q2 the company had fully accounted for large OEM customers transition to JIT manufacturing and turns business. 2. Cash flow will improve in Q3 because inventory levels were high, but being used to satisfy higher than expected demand. 3. Q2 shipments were weighted heavy at end of period, these revenue will come in Q3 since they missed Q2. 4. Inventory DSO increased, and physical inventory was higher in Q2. 5. Inventory levels for OEM customers in Q2 were estimated at 2 weeks. 6. Communications was expected to remain strong through rest of FY99. 7. Turns business usually reslults in higher margins & faster payment. Your question was asked in the last CC, and the response was that earlier estimates were for a flat Q3, but after only a few weeks of Q3 they had already adjusted revenue growth to reflect a new mid-single digit growth. I think that has been re-visited again, but I have no numbers. Also, the company was very cautious with numbers projected for Q3 & Q4, despite seeing a nice pickup in business beginning in Q2. To generate mid-single digit revenue growth in Q3, they anticipated only needing 20-25% turns business, when the average is 30-35%, and this quarter has all the makings of being anything other than average. A comment was made at the last CC that there will certainly be some dramatic changes throughout the quarter. I fully expect that this anticipated change has been realized, and more as evidenced by lead times being pushed to 6 weeks or more. I think the key to answering your question was how much inventory did SMTC have on hand at the beginning of the quarter. In August inventories were stated at $19.6M compared to $17.0M in February, which leads me to conclude they had at least $19.6M in revenue because I believe inventory levels have pretty much been depleted. There seems a fair chance that some of the revenue will hit the books in Q4, since orders filled late in the quarter would first need to be delivered and the lead time seems to prohibit this occurring by the end of Q3. Even so, I think Q3 will be a resounding success, and based on conservative estimates by management this quarter, I think bot revenue and earnings will experience nice upside suprises. Concerning buyback of shares, I expect that the company DID buyback shares this quarter. This issue was also addressed at the last CC, and the response was that the company was interested in getting into the marketplace and having a consistent policy of purchasing equity. That sounded like they were interested in buying back shares when I heard it, although the exact number had not been determined at that time. If SMTC pigged out on their own shares this quarter, we really got all the makings of a GREAT Q3. I wonder how much they ended up buying :o) The Acapella transition prevented buyback of shares until October of this year. If you look at the price chart, there was a definite pickup in volume as well as price at that time. It may reflect the company buying back shares rather than institutions, which is something I had mentioned a while back. I think SMTC managment knows a good deal when they see one. Regards, JB P.S. New product announcement: quicken.excite.com P.S.S. so ... based on this, do you think SMTC needs to re-test the 100 day ma one more time? Thanks :o)