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

To: Denice who wrote (4377)	5/14/1999 9:22:00 AM
From: Carl R.	Respond to of 4697

I have no opinion at this time, sorry. The stock could well be in the early stages of recovery, but it is also possible that falling DRAM prices will lead to production slowdowns, which in turn will worsen the wafer situation. On the other hand if RMBS succeeds in returning from the grave the wafer situation could improve dramatically. Carl

To: Denice who wrote (4377)	5/14/1999 9:41:00 AM
From: Zeev Hed	Read Replies (3) \| Respond to of 4697

Denice, WFR is going to do better because the semis are in full bloom, but in the process, I believe management has committed too many missteps, the number of shares has almost doubled, the balance sheet has deteriorated (limiting WFR's ability to invest heavily in the next generation wafers two three years down the road) and the breakeven is now probably (without the future higher margins 300 mm wafers) well above $250 MM as long as Spartansburg is open, and somewhat lower once it is closed. They probably have two more quarters of losses ahead of them. Until pricing power comes back to that segment of the industry, meaning an increase in demand from last quarter of some 50%, IMHO, they will not be making money. To have visibility of let say $1/share earnings before taxes (god knows they have a lot of carry forward), or $70 MM, I think they need to operate at an annual rate in excess of $1.2 billion, or double the rate of the last quarter (which was an annual rate of about $600 MM), that will assume about a 10% gross margin (right now they are still at negative gross margins, but hopefully with the closing of Sparta and increase production in Asia, margins will improve). Frankly, I do not see them reaching these levels for some time. I am figuring that the book value has now deteriorated to under $6/share, so they are no longer a great bargain. From a technical point of view WFR has broken out alright, but there are many other ways to participate in this segment which in my opinion are better. I would be a seller when the stock gets back to the $10 to $12 area if I owned any. ASs a matter of fact I would be a seller around here as well. When the 300 mm program comes on board, one should reevaluate WFR's success or lack thereof in capitalizing on this high margin opportunity. Zeev Zeev