Vishay Basks in Bucks

Electronic News, June 26, 2000 by Carol Haber

How quickly are conditions improving in the passives business? So quickly that Bear Stearns has hiked its earnings estimates for passives firm Vishay Intertechnology Inc. five times in five months.

The Malvern, Pa.-based firm manufactures passive components, including resistors, capacitors, selected ICs, optoelectronics products and transistors. The target markets are cell phones, automobiles and portable computers. All are fast-growing businesses.

Thomas Hopkins, an analyst with Bear Stearns, is estimating that Vishay will earn 77 cents per share on revenues of $580 million in the second quarter of 2000, vs. 16 cents per share on $425 million in the same quarter of 1999. For the full year, the company is expected to earn $2.97 per share on $2.3 billion in sales, vs. 76 cents per share on $1.75 billion the year before. Like a number of other Wall Street analysts, Hopkins has a "buy" rating on the shares.

Avi D. Eden, vice chairman of Vishay, spoke to potential investors at the Bear Stearns Technology Conference in New York recently.

"In the 25 years we have been in this business, we haven't seen anything like this," Eden said, referring to the cell phone markets. "We don't have any reason to doubt the basis of the demand, the new features, the coming replacement market. It seems to be a really generic application for the next year or two. We don't think capacity will catch up." Despite a little rockiness in Vishay's stock price of late, he tried to calm investors' fears."Let me reassure you, we don't see a change in the business forecast or climate," he said.

In addition to capacity decisions, there are other challenges to companies in this type of situation; for example, making sure customers get product. At Vishay, Bear Stearns' Hopkins said, it's an orderly process.

"Customer contracts are firm," he added. "Everyone understands the pecking order. They know who their customers are. Distributors get their share."

Products in short supply throughout the industry include tantalum and multilayer ceramic capacitors, diodes and chip resistors, and other products.

At the Bear Stearns session, Eden was quick to point out that Vishay is not just a cell phone story, even though it has the potential to sell $13.13 worth of components into every cell phone. The average annual growth rate of passive components in computers is expected to be 21 percent annually industry-wide. Growth in the dollar value of passives in cars is expected to rise from $41 to $61 per automobile.

For 1999, telecom represented 35 percent of Vishay sales, industrial and commercial 29 percent, computers 17 percent, automotive 15 percent and military 4 percent.