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Simple Technology: Simply Making Money

With the surge in new hardware technologies, there has been huge demand for semiconductors. In fact, there are big shortages, which is increasing prices across the board.

A major beneficiary is Simple Technology. The company plans to go public in late September. The price range is $10-$12 and the company intends to issue 6.3 million shares. The lead underwriter is Lehman Brothers and the proposed ticker symbol is STEC.

Simple Technology is a provider of standard and custom memory products. These products include technologies like DRAM (dynamic random access memory), SRAM (static random access memory), and Flash memory. In all, the company has 2,500 memory products.

A critical innovation is Simple Technology's IC Tower (for which the company has a patent). Basically, this makes it possible to stack memory chips so as to increase memory but not the product footprint. In fact, the IC Tower is the company's highest margin product.

In the first half of 2000, the company had $132.7 million in revenues, which was up from $83.3 million in the same period in 1999. Profits in 2000 were $7 million.

The demand for memory products is not temporary. A study from Dataquest indicates that the market for DRAM is expected to grow from $23.1 billion in 1999 to $76 billion by 2002. What's more, the SRAM market is expected to grow from $4.5 billion to $6.6 billion and the Flash memory market to grow from $3.9 billion to $8 billion.

The other big factor is that, as companies work to shrink the development time for products, there will be more reliance on the outsourcing of the design, development and manufacture of memory products. In the past ten years, Simple Technology has built the necessary technical infrastructure to such business.

In light of such trends, expect Simple Technology to be one of the top IPOs for September.