Silicon Storage Rides a Rocket

Silicon Storage Technology Inc. (SST) (Nasdaq: SSTI) stock bounced 43 percent Thursday after themaker of flash memory components predicted third-quarter revenues andearnings that clobber analysts expectations. The stock closed up $2.02 (32.17%) to $8.25 on share volume that was nearly eight timesnormal.

Silicon Storage said it expects revenues for the September quarter to bebetween $73 million and $77 million, well ahead of the $60 million analystconsensus figure from Thomson Financial Securities Data. Likewise, the companypredicts pro forma earnings of 1 cent to 2 cents a share, topping analystpredictions of a penny loss. The positive earnings news greatly outweighedSilicon Storage’s negative news that it plans to record a $40 million to $45million charge against inventory for the quarter.

Slower information technology spending had taken a toll on the company,which sells 13 percent of its products to networking OEMs and the rest toPC, peripheral, and consumer electronics makers. During last year’s thirdquarter, Silicon Storage earned 36 cents a share on $164 million revenues,which is more than double the new estimate for this year’s quarter. In 2000,the company had $490 million in sales. The consensus for this year is $286million. But that could change as analysts revise their numbers upward.

Shortly after Silicon Storage’s news, Credit Suisse First Boston raisedits 2001 revenue estimate from $272 million to $300 million and its 2001estimate to $330 million. CSFB has nearly tripled its 2001 earnings forecastfrom 4 cents to 11 cents and expects 15 cents in 2002.

Despite calling today’s news “an amazing accomplishment,” CSFB maintainedits Hold rating on the stock. Three of the four analysts who follow thestock rate it a Hold while one rates it a weak Buy.On Sept. 20, after Silicon Storage closed at 4.61 a share, the companyannounced it planned to repurchase $15 million of its common stock. Sincethen, the stock is up 80 percent.

— Tom Davey, special to Byte and Switch, http://www.byteandswitch.com