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Data I/O Corp. Message Board

  • Fujigrower Fujigrower Oct 25, 2008 11:56 AM Flag

    Q3 conference call thoughts

    -$7.9 million in revenues with a $1.2 million profit was solid but not a blowout. Remember DAIO generated these results in a global economic slowdown with a leaner staff.

    -It is not surprising a few shareholders bailed out Friday. Their concern is likely how much market drag DAIO may experience in Q4 and 2009. For short term investors, converting shares to cash is safe.

    -Long term investors should hold their shares and consider buying more. The company is stronger, more efficient and more competitive now than at any time in the last decade.

    -DAIO now has three key platforms where they offer the best flash programming solutions on the planet: Roadrunner, FLX500, and the PS Series. New extensions and applications are steadily enhancing these platforms and widening the competitive gap. A fourth platform in software that helps customers manage the security of programmable content has been launched. Protecting smart phone intellectual property will be an increasing priority for iPhone/ANDROID/RIMM/Nokia manufacturers who are not eager to see cheap Chinese knock-offs appear immediately after their new phones are launched.

    DAIO's is steadily strengthening relationships with Apple, RIMM, Nokia, Samsung and other global leaders. Smaller electronics manufacturers pay close attention to what global leaders are doing.

    Many of DAIO's flash programming equipment competitors were already struggling to keep up and in some cases keep their heads above water. The economic downturn will give DAIO the opportunity to capture more market share.

    DAIO's new "lean" operating structure moved the company's break-even level down to roughly $5.3 million per quarter. This structure is designed to weather economic downturns.

    DAIO's staff is more experienced and cohesive than ever. How many publicly traded tech companies (or any company) has a leadership team (CEO, CFO, Production Manager, Marketing Manager, International Sales Manager, etc.) who have worked together for over a decade? Strong teamwork wins games... even in bad weather.

    How cheap is DAIO at $3.20? The company has enough cash to repurchase over 35% of its outstanding stock. With an Enterprise Value of $17 million the company generated $7 million in cash during the past 12 months.

    What is the downside risk? In the short run one major sell order without corresponding buy orders can push DAIO's share price as low as the market makers care to go. In the long run, the world's leading flash programming solutions and equipment provider has an "intrinsic value" that, in my opinion, is higher than the current market cap. At some point the Board of Directors, even with the handicap of William Walker's wimpy leadership, would authorize repurchasing shares.

    The second factor limiting DAIO's downside risk is its inherent acquisition value. Fred Hume highlighted DAIO's joint marketing with Siemen's Siplace team. A caller asked if DAIO would fit better within a larger organization rather than as a publicly traded company. I am not predicting or advocating that scenerio but the possibility reduces DAIO's downside risk. Companies evaluating making an acquisition are always attracted to the clear market leader.

    Fred Hume noted iSuppli and Webfeet studies predicting "flash programmable content" to grow over 100% annually for the next five years. Samsung said NAND prices dropped 35% in the last quarter. The flash programming revolution is not slowing down. Thousands of flash programming miners around the world are going to need more picks and shovels.

    I have no clue how bad the world economy may get but the best companies in each niche, whether fruit growers or flash programming solution providers, will get through it and eventually thrive. Global demand for apples and flash programming solutions in not going away.

    Good luck to everyone.

    Fujigrower@gmail.com

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    • Fuji.........thanks for your ever so excellent post....i am into following daio........sure looks interesting and i appreciate your"honest"intelligent interpretation.....i am following cksw as well (dont mean to be a lurker bt when i find something of interest pursue it) but they dont have enough cash for me...i am finally learning to read balance sheets......i only do value (i should say undervalued) stuff now...my education has been long since mana but time has brought lots of education to me..lots..my financial skills are limited at best but i have found some good brains to pick''very few.. for every honest poster there are 100 pumpers and bashers...you have to look long and hard. a value stock for you to put on your perusal list......vclk....my all time favorite..i have had fun with it and met some good people....it was a great deal before earnings and now they are doing a buyback which they have done before.....solid, tons of cash...........thanks for sharing and good luck to all....... THANKS AGAIN...GOLDIE

    • I agree, they have plenty of cash flow to issue a stock buy-back. The other option is to just sell the company but not at these pries! I am still thinkng $9.25 is fair value

    • Roy,

      Check out Data IO's web site for more information. Hume has been with Data IO since 1999. I think he is in his 60's. He came on at a tough time and has turned things around. With a P/E around 4. I would think Data IO's share value will continue to move north as investors regain confidence in the stock market. I would like to see Data IO do a modest stock repurchase program.

      Good Investing!

      Spenc

    • Thanks again for your insigthful knowledge and information. Perhaps you can answer this for me. How old is Fred and how long has he been at the helm and when is his contract up!
      Please advide

    • I've been wrong so many times regarding DAIO over the years that at some point the law of averages has to catch up. I'll take another shot in regards to yesterday's 20%+ decline in share price.

      -One of two scenerios triggered the sell-off, an investor who sees an "uh oh" Niagra Falls scenerio ahead for DAIO's revenue stream or an investor (private investor or hedge fund with a margin call, institutional investor's with shares being redeemed) forced to sell. I suspect it is the second scenario.

      -DAIO's Q4 revenues will undoubtedly drop in the short run but that does not justify an "Enterprise Value" of $11 million for a company that generated $7 million in positive cash flow over the past 12 months.

      -DAIO has plenty of company among microcaps where the most accurate adjective for the share price is "insane." Tech bubble valuations were insane when investors stampeded upward in 1999 were in that category. This stampede is identicle but in the opposite direction.

      -DAIO has enough cash to repurchase 50% of the company's outstanding shares. Fred Hume mentioned one large investor opposes a share repurchase program. At this price level Mr. Hume and his leadership team should poll a wider group. Repurchasing shares now at $2.50 will make all DAIO shares and options worth much more in the future. The company can leave enough cash to ride out a few weak quarters.

      -Yesterday's DAIO/Zollner press release illustrated why demand for DAIO's programming equipment and solutions may decline in the short run but will continue to grow over the long run. Zollner is a new customer and they made a $500,000+ investment in a customized DAIO PS588. This will go in one of their 14 manufacturing plants. They have 7,000 employees and introduce 2,000 new products every year. Do you think there is opportunity to sell more leading edge flash programming equipment and solutions to Zollner?

      Worldwide Zollner ranks "among the top 15" Electronic Manufacturing Services companies. Could DAIO have a few opportunities among the other 14?

      "The main reasons for Zollner's decision were process safety and transparency." Whether with smart phones, automobiles or other high end gadgets, the tolerance for defects of any kind continues to shrink. Continuing to have parts programmed mannually in the back of Uncle Wang's garage in Shanghai simply is not going to cut it for many manufacturers.

      Many consumers will have to tighten their belts during the global economic downswing but demand for new gadgets like Smartphones is not going away. Google, for example, now has a "Learn more about the G1 Phone" link immediately under the search bar.

      http://www.google.com

      The number of Smartphone units shipped, whether iPhones, G1's, Blackberry Storm's or Nokia touch screens will continue to climb globally. If/when Apple introduces a lower cost "iPhone Jr." the units shipped for that phone alone will skyrocket. Someone has to program them. It won't be Uncle Wong.

      These increasing # of units shipped not only require more flash programming equipment but also more flash programming consumables. In Q3 $2.4 million (30%) of DAIO's revenue came from consumables. While Uncle Wang can buy counterfeit DAIO sockets at a discount in the alley behind his garage, the Apple's, Nokias and RIMMs of the world will not take the risk.

      I've studied DAIO for five years. The company is stronger in its product line, efficiency, competitive position and staff cohesiveness than at any time during that five years. This is a very strong team.

      Like the "Jenny" sailing back into port after the Hurricane in Forest Gump, when DAIO gets through this global economic downturn their market opportunity be better than ever.

      Good luck to everyone.

      Fujigrower@gmail.com

    • Great summary..
      I believe these guys should engage in a buyback, asap or heat the take out discussions. I am sure larger players can scoop up DAIO in no time. I am in there buying more.... What do you think will most likely happen

      • 1 Reply to roy_358888
      • A buy back is not necessarily a good use of cash and I am in the camp the would argue that insiders and institutions benefit rather than common shareholders. If a stock will face selling pressure trying to prop up share price will work no better than the government trying to prop up housing. If the corporation is well run and is making money share price will envntually follow. This whole market is in a cash crunch. My hope is we keep our cash which helps keep us strong. I also do not feel we need to be bought out. America needs good corporations which have the focus to get things done. Size is no indicator of strength in this economy.

 
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