Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: Glenn who wrote (9019)	1/21/1999 3:56:00 AM
From: Waldeen	Respond to of 90042

Glenn as you have been saying, wireless does seem to be strong, check out pwav yesterday.... This stock broke out. I can't say I really recommend it abave 25, as I have traded it successfully several times the last year as it bounced off 20-21. But it really looks to have broken out today, so it might be a good momentum play tomorrow and then possibly a short. What's interesting is how this relates to the overall wireless market, as power amplifiers are like "basic building block" parts of the infrastructure. Unfortunately I sold covered calls before earnings last week and exited, figuring earnings would be less than a nickel per share and it'd begin selling off. Locked in my profits and almost kept the shares. Only source of news for the movement is the upgrade that I will post below. In the past, the differing analyst upgrades on this one ‘seem' to pick the tops, like “we've upgraded it now so our clients can get out.” but of course that is just a generalization. Long post, but there might be similar plays in here, like GEMS that someone(?) mentioned here besides the obvious Microwave Power Devices, etc. Anyone followig GEMS here could comment please? If there is more news to this one, I would speculate that someone thinks there is going to be more build-out of wireless networks (see “indications of interest” with “eight domestic” below)... meaning you need the RF amplifier. If that were so, whoever was doing the build out would need them, so there could be a tie to OMPT or even LU if someone is planning nationwide GSM coverage. Of course Bell Atlantic was mentioned, and Nortel has already been buying alot. I'm speculating here, so any inputs would be appreciated. Waldeen upgrade follows: 02:28pm EST 20-Jan-99 BT Alex. Brown Incorporated POWERWAVE TECHNOLOGIES, INC. (PWAV) “STRONG BUY” Further Comments On 4Q Results HIGHLIGHTS:  Management provided some additional comments on 4Q 1998 results.  The company enters 1999 with a backlog (indications of interest) totalling $70 million, excluding any orders out of Korea. Note that our forecasted sales for 1H 1999 total $76.5 million. This backlog, combined with a strong, well-balanced OEM and service provider customer base provides increased visibility.  The company is currently in multiple international and domestic trials that should covert to new orders.  The company's customer base includes several major global OEMs and service providers such as Nortel, Lucent, Ericsson, Bell South, and Bell Atlantic, among others.  PWAV's Korean exposure has declined sharply, with just $7.1 million or 18% of 4Q sales into that market. We have modeled a low Korean revenue base for 1999, in the range of $4 million per quarter.  We are forecasting that gross margin should recover into the mid-30's by the end of 1999, driven by volume efficiencies.  As the world's leading independent supplier of RF power amplifiers, PWAV is well positioned to benefit from strong global industry growth.  We rate PWAV “strong buy” with a 12-month price target of $30, based on 30x our FY 2000 EPS estimate of $0.95. DETAILS: Tuesday after the close, PWAV reported 4Q 1998 sales of $40.0 million and EPS (excluding charges) of $0.04, versus our forecasts of $33.5 million and break-even. In a Wednesday morning conference call with investors management provided some additional comments on the quarter. ORDER INFLOW AND A STRONG BACKLOG The company enters 1999 with a backlog (indications of interest) totalling $70 million, excluding any orders out of Korea. Most or all of this backlog should be shippable in the first two quarters of the year. Note that our forecasted sales for 1H 1999 total $76.5 million. This backlog, combined with a strong, well-balanced OEM and service provider customer base provides increased visibility. EXTENSIVE TRIAL ACTIVITY The company is currently in 13 trials, five international and eight domestic. In the U.S. PWAV is in trials with Bell Atlantic in four of the RBOC's nine regions, and should be in trials in two more by the end of January. The company has received orders from three of the four regions it has trialed with Bell Atlantic. SPECIAL CHARGE OF $12.4 MILLION Reported results included a non-recurring charge of $12.4 million related to in-process R&D expenses associated with the Hewlett-Packard RF power amplifier business acquisition. CUSTOMER BASE IS WELL BALANCED, AND INCLUDES MANY INDUSTRY LEADERS The company's customer base includes several major global OEMs and service providers such as Nortel, Lucent, and Bell South, among others. In the 4Q, Nortel accounted for 50% of sales, Lucent accounted for 10%, Ericsson 5%, Bell South 5%, and Bell Atlantic 30x our FY 2000 EPS estimate of $0.95.