If 27% of TER's business is contract manufacturing and this business should be valued at 35 times 2001 earnings (to match Solectron, Flextronics or Sanmina even though TER's margins are greater), then we arrive at some interesting conclusions.
If we value the contract mfg. business at 35 times next year's earnings, then the rest of TER's businesses are being valued at 7.6 x 2001 earnings (to come up with an overall 2001 PE of 15).
This is ridiculously low for a leader in the ATE field.
A very conservative valuation estimate of FMV. Remember however, that KLAC, AMAT, etc, are currently valued below fair value given expected 2001 growth. The entire sector is a bargain, so when you use them as a benchmark, I believe you need to further increase your base.
You are dead right. Another way to look at it: Connection Systems is approaching $1B in sales. Entire company sales last year were $1.8B. Semi equipment analysts who follow TER just don't get it. If Co. were to split in two, think what the two pieces would be worth to shareholders.