Greg, just to clarify I'm not saying $12 is the price but just doing the math on the cost saving numbers you posted while noting the big difference between using next year non-GAAP vs last year GAAP earnings. As you note higher prices are paid for takeovers. They usually come when there's a strategic fit with the companies. Something like two functions that are now in separate chips could be integrated into a single chip and take greater market share. Or a company with an existing sales team in a new market can get a product adopted quickly. I'm not as familiar with ATML as you so was looking to see if there is anything like that which would make a buyer say we need to have ATML and it's worth more to us than to others. I agree it's a good time to be up for sale so that is possible. Of course, it's also possible like you say they don't sell which may be better in the long run but that probably makes it a $9 stock for a while.
Greg, thanks for your many posts here. I've learned a lot about ATML from you. Here's my thought on the PE. Without the takeover premium, the stock was trading in the low 8's on Morgan Stanley's next year expected non-GAAP EPS of 0.65 which gives a forward PE of 12.5. If you want to compare it to the TTM PE of the S&P, then ATML's TTM PE on 0.11 GAAP earnings is currently 94. The earnings increase you referenced is what justifies the buyout but while that increases earnings unless the future growth rate increases the PE probably shouldn't change. Now, if the buyer can open up new markets or something then the PE can increase. Anyway, 13 * 0.92 is basically $12. That's actually a pretty good premium over the low 8's it was trading at before. Do you think a buyer can expand ATML products into new markets or increase market share? Would splitting the company with more than one buyer make sense?
"So take 92 cents and give that a 20 multiple...$18.40"
Really... 20x next year non-GAAP earnings that assumes all of that has occurred is a fair multiple?
Yeah, the Ireland project is definitely grid stabilization but most of their renewable energy is from wind. Not a lot of sunshine there.
We are currently seeking a Sr. Power Electronics/Electrical Engineer. The position will oversee design and installation of energy storage system to an existing photovoltaic array. Must be well versed in DC/AC inverters, and have experience with other power conversion electronics. Power levels are in the 10s of kilowatts to megawatts.
They have a 2013 contract with Soitec for a photovoltaic installation at UCSD but that wraps up in November so it seems a bit late to be hiring for a design position for that contract now. Any other solar projects?
There were a number of people who said they were going to the ASM. Anyone who went want to share their thoughts? Here are a couple things from the audio presentation.
1. At the 19-20 minute mark he made a reference to a Sony TV
2. At 29 minute, he said "we sell red emitter, red host, green, yellow, and light blue for lighting". Did he mean to say they sell green host or are they selling a red host now?
3. He commented "we are focusing on blue emitter and blue host which is the next frontier. We're making progress as you saw on the video." Any comments on blue from someone at the event?
4. Any comments on gen 8 size OVJP or encapsulation?
5. Zikzak, did you get yours answers on LG's M2 line?
Some early signs that LG is preparing for the new M2 line. They are closing out the 55" FHD EC9300 and 65" EC9700 models. The expected launch dates for the new flat models start in late August and September. I'm guessing the flat models will be coming off the new M2 lines. Of course that doesn't say much about yields until prices start coming down. The 55" 4K model price has dropped by $1,000 on Amazon to $4,499. In the tea leaves category, on the LG US website they moved the OLED TV category to the top of their list of categories and LED TV is now just above Plasma. They have also removed the new OLED models that were listed but not yet released which sometimes indicates they are getting ready to list the actual models with prices and such rather than the placeholder listings they had previously.
I'm not sure one can predict when they will hit a magic yield rate but we'll know it happened when we start seeing prices drop and investment plans announced. I will agree I'm not sure the Korean translated word "invest" means the same thing we think it means. In the meantime, there are lots of articles to quote. Here's one from etnews on May 20.
"He [President Yuh Sang Duk of OLED business department] also showed confidence in issue with its price which was considered as the biggest obstacle in OLED market. He was confident because LG is able to produce 100,000~120,000 panels per month through E4 line that starts full-scale in third quarter of this year."
And the April 10 WSJ interview with Han Sang-beom, chief executive of LG Display.
WSJ: What are the priorities now?
Mr. Han: We will be fully ramping-up our second OLED factory by the end of this year, and we’re considering a third potential plant. The second plant will be able to process up to 26,400 sheets of mother-glass a month (six 55-inch screens can be produced from each sheet), which will be in addition to the first plant, which has capacity of 8,000 sheets a month.
WSJ: What can you tell us about upcoming investment plants?
Mr. Han: We’re thinking about it but it all comes down to what our clients tell us and their needs. We do have to think about our “next steps” since the additional 26,000-sheet-per-month of capacity is still relatively small compared to what is typically considered for LCDs. For LCDs, a new investment round would normally mean something like an additional capacity of 60,000 to 90,000 sheets. Decisions would depend on market reception this year. We also have to think about whether the next investment would be about installing new capacity or switching existing LCD capacity to OLEDs. The former would be more costly while the latter would eat up our LCD output.
GM is hiring for ultracapacitors in a stop start application. Looks like a program with a combination lithium ion battery and ultracapacitor. Several months ago they hired a position requiring "In-depth knowledge of electrical circuit design and operating principles and performance characteristics of high power switching devices and energy density capacitors for automotive applications". The position also required developing test plans for vehicle assembly and monitoring customer feedback. More recently they are hiring an electric power development application engineer for "current and new programs related to energy storage systems e.g., Lead Acid Battery-based, Li-Ion Battery-based, Ultra Capacitor-based" and "development of future strategy and roadmaps for energy storage systems"
what if any is the relationship of ITO (indium tin oxidue) and AMOLED?
It's an indirect relationship. ITO references current touch screen technology. One of several drawbacks to ITO is it is rigid and cannot be bent. Going to silver nanowire touchscreen could suggest a flexible display. Flexible display suggests AMOLED. Apple does have a job opening for silver nanowire touchscreen development for iPad as well as other jobs specifically related to OLED.
What I was trying to say is that since the OLED market grew less than forecast but the license fees continue to increase the effective royalty rate has increased over time vs if there was a specified royalty rate that would probably have stayed constant. Perhaps UDC knew more about the market than DisplaySearch. You can argue about the rate value but it has to be considered that there wouldn't have been an OLED market without Samsung. Do you really think a company will hold off on OLED production a couple years just to figure out what LG is paying in royalties to UDC?
Slacker, I agree the range of returns is quite large but I would just make a couple points. To the extent the SDC agreement generated lower revenue than expected it is because SDC hasn't increased fab capacity from 2011 until this quarter with the A3 line while the expectation was for faster growth. It was slower because it took time to work out manufacturing issues with flexible and TV and Samsung made the strategic decision to keep OLED displays for themselves rather than selling them broadly. I understand your preference for royalties over license fees but it's just math based on capacity and under the circumstances I think UDC came out ahead with the deal they had. The rate that you compute would be higher if you don't include the touch sensor in the OLED market value and I just don't see how one can expect UDC to get a royalty on the touch sensor regardless of transfer pricing issues. I guess the good news is TVs don't have a touch sensor.
On disclosure. I agree it's frustrating but I would really prefer they work out the blue and get the patents in order before they disclose much on it. It would really be irritating if they disclosed their work getting 90% of the way there and then somebody else threw out a punch of tag on patents that blocked the last 10%.
The LG rate. I agree that's a mystery. I would just say the contract seems to be fairly complex and looks to include technology collaboration as well as just a straight royalty rate. There are only a handful of display manufacturers each with their own issues and preferences so the contracts may not be just a standard form. It would be good to know the details but I also understand wanting to maintain a competitive negotiating position too. There's always a trade off between risk and return. Life would be boring if it were all easy :)
so with 30 mill and added royalties from lg are we looking at close to a buck?
They have to pay 3% to Princeton/USC and 16.5% Korean tax on royalties. Since taxes do actually matter they net about 80% of royalty income. So the 30 million from Samsung nets out to about 50 cents/share. The LG payment also includes some in upfront license fee and might also include milestone payments and be skewed to later quarters when more production capacity is online but if you think there is 6 million per quarter then that would add another 10 cents per share. That is a big if particularly next quarter but if so they might get to 60 cents in earnings. Just to keep expectations somewhat reasonable. That would be a big number.
Any particular reason VW?
I don't want to speak for mboo but I would guess it's because Lamborghini which uses a Maxwell ultracapacitor for stop start is owned by Audi which is in turn owned by VW. Volvo also had a demonstration model of an S60 last year with an electric supercharger using a 48 volt ultracapacitor.
a. Do we know how much of the LG royalty payment was in the $35.3M in Q1 last year?
Q1 revenue last year was $37.3 million. LG royalty payments were still low (less than $1 million) and started increasing in Q2. There should be a small decline offset by an amortization of the LG upfront license payment.
b. Was SDC using their own host back then, or host from UDC?
SDC (though Nippon) bought $12 million in host in Q1 last year which declined to $5.8 million in Q4. This is why analysts are forecasting a $5 million drop in revenue. They are probably expecting some offset to be made up in new mid tier phone displays by Samsung and increased materials at LG with the start of the M2 TV line though there was a temporary shutdown at LG due to a gas leak.
are increased S6 sales ramp-up not reflected this Q?
There will be an increase in materials to Samsung for the S6 vs Q4 but maybe not vs Q1 last year. Samsung had high expectations for the S5 and produced heavily early on. It was in Q2 and Q3 when sales fell short of expectations that they cut back significantly on production. It sounds like the S6 sales and production might extend out further through the year making for better Q2 and Q3 results for UDC. The S6 wasn't shipped until April 10.
could Iwatch material purchases offset the deferred LG royalty payment?
iWatch materials will be low because the screen size is small. The royalty should be higher but that would show up in Q2 and beyond.
MXWL market cap is around $190 million. They have $158 million in federal and $65 million state tax loss carryforwards.
From the call: "We are currently evaluating new areas of collaboration, including technical and commercial projects that extend our collaboration beyond pure material science focused engagement. Clearly, the progress we are making in our partnership with Corning shows that joining forces with a company of Corning’s quality and strength has many benefits for Maxwell, its future, and our customers."
Who wants to start the buyout rumors...?