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CY is one of the 5 largest suppliers of fast SRAMs, along
with Samsung, Motorola, Micron, and IDTI.
SRAMs accounted for 60% of CYs sales in Q3 1995. They have
a very competitive 256K SRAM, a proprietary 64k x 18 Pentium
Burst SRAM, and this year will produce its first 1MB 32k x 32
chip. 25% of sales are FPGAs, 15% specialty datacom chips.
Less than 10% of SRAM sales are outside US, with zero exposure
to Taiwan (where SRAM ASPs have been crumbling).
Q1 1996 is 76% booked. CY's exposure to the PC (motherboard) market
is 10% of total sales. They have consciously diversified away from
the PC market, into switching systems and digital cellular
phones, disk drives, laser printers, and industrial electronics
equipment. CY's strategy to prepare for declines in SRAM
pricing is to reduce costs aggressively. Margins are at 55%.
CY reports Q4 95 on Jan. 17. EPS is expected at 0.35, bringing
fiscal 95 EPS to 1.06. Stock is trading at 11.3 x this.
fiscal 96 EPS: 1.60 (paine webber) 1.65 (morgan stanley)
stock is trading at 7.5 x 96 EPS.
Question is, can they deliver $1.50 - $1.60 in 96? If so, BUY.
Technically, this stock is basing in here and looks very good
if it can pierce the down trend line connecting the 52 week high
with the highs of the down trend. It will do this just by trading
sideways. I've noticed very good support on the bid side at any
price below $12 in the market (trades on NY) so you can see the
block sizes of the bid and ask. Often the bid goes to "infinity" or
999 block size below $12. Traders know what i mean here.
If we can get comfortable that they arent too affected by Intel
designing out the SRAM in the pentium pro, this is probably the
best SRAM stock to buy at these levels versus ISSI, IDTI.
CY has its own fabs, unlike these other 2, and this may be an issue
at some point in 1996. any comments?
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