Replies to post #24989 on Zeev's Turnips Patch-No Politics (ZEEV)

[Bcrafty]

Zeev, do you have any turn calls coming up
within the next week?

I know about your late October call, but I was wondering if you have any for the short term.

TIA

[mlsoft]

Zeev...

Just as you mentioned STM as a competitor for ZRAN and ESST, they are moving into a number of areas, and they are very tough competition. STM is merciless on suppliers which helps keep their costs low and they always plan on doing large volume business in any area they move in to. STM has a history of moving in with what I would call predatory pricing, selling below cost to nab a large percentage of the total market. I remember saying earlier (#msg-427216) on this board that they were moving into the DVD chipset area and would cause trouble.

They are doing the same thing in the power chip arena, and looking into video chips, from what I hear. They try to identify high profit niche areas where a few smaller companies are doing well, and move in with an eye to be the dominant player. Because of their size, they can sell chips (with a decent profit) for less than the much smaller competitor's cost to produce them with a small sacrifice in high end technology. They will end up dominating a number of areas by the time this slowdown is over.

mlsoft

[JLSegal]

Zeev, interesting article in today's (9/16/02) IBD regarding DVD chip sales regarding new competition for ZRAN and ESST. MediaTek has a product that combines processing and video on one chip (used to take 2), neither ESST or ZRAN have such a product, but are working on one. (ESST expects to offer it's single chip device,Vibratto II, by the end of the year)
Towards the end of the article, IBD does offer hope for ESST and ZRAN in the DVD market. Analysts say that MediaTek doesn't have all the "rich features" that US companies offer.
Also, says IBD, expect DVD sales to be further spurred by the ramping of new recordable players which will both play DVDs and record TV programs and movies.

FWIW, in ESST's 2ndQ conference call it was the mention of MediaTek that caused a stir, and subsequent $4+ (25%) drop in ESST share price, despite a very positive earnings announcement, and 'not bad' guidance. (Two weeks later, on 8/8, ESST announced a 5MM share repurchase, and confirmed guidance and strong position in the industry.) I thought the sell off was over done, and the stock way undervalued, even if they did warn. What I didn't expect was a warning of this magnitude ... most notably the expectations for a huge 4thQ miss. (needless to say, I took another big hit from ESST. It was one of the few stocks I thought was worth holding as a longer term 'investment') IMO, the stock should have dropped further yesterday, but probably was getting large support from short covering. Last report showed an appx. 50% of float short position (not counting the 5MM buy back): 35MM in float, 17MM short. It'll be interesting to watch ESST's price performance over the next couple weeks, with an appx. total of 22MM shares (17MM short + 5MM buy back) that need to be purchased (depending on how much covering was done yesterday) .

I'm curious what your revised (assuming they are revised) expectations are for ZRAN's stock price performance both near term (next week) as well as for the next 2 - 3 months. Did you keep the shares that were 'given' to you last Thursday at the $11.50 area? If the problem is 'ESST specific', and ESST is actually losing market share to ZRAN, which some analysts believe, then this could prove to be one of the last great ZRAN buying opportunities.

As always, thanks in advance for your valuable input.