Notes from Pericom Semi's Annual Shareholder Meeting

|
 |  About: Pericom Semiconductor Corporation (PSEM)
by: Matthew Rafat

I attended Pericom Semiconductor's (NASDAQ:PSEM) annual shareholder meeting on December 11, 2008. There was no presentation. Water and soda were available to attendees. It appeared I was the only non-employee who attended.

Pericom's main business is enabling high-speed serial connectivity. Pericom makes chips that connect high-speed components inside TVs, phones, computers, and servers. You can read more about the company here: http://www.pericom.com/about

Because I was the only non-employee attendee, CEO and President Alex Hui sat down with me after the formal meeting to engage in a Q&A session. I asked him several questions, which he was kind enough to answer.

He said that Pericom had a history of spotting the trends in the market. As a result, they were early to market when it came to inventing technological solutions. Mr. Hui said his company's focus was on "total connectivity" and "timing solutions."

I asked him to identify the areas of growth within the technology market. He said that in 2008, notebooks and servers had led the way; in 2009, digital TV and GPS would be major drivers; and in 2010, he predicted that telecom and networking solutions would experience growth.

Mr. Hui also said that his chips were not "systems on a chip," or SoC. He explained that Pericom's chips were analog-based.

I asked him to talk about Pericom's major products. It is difficult for a semiconductor company to explain their specific products to a layperson because their business involves enabling other products, like TVs. Semiconductor companies function like linebackers in a football game--you only notice them if they fail. Yet, if they fail, the entire product or team fails. Mr. Hui said his products related to timing; signal integrity; and switching/routing. He saw competition from Texas Instruments (NASDAQ:TXN).

I asked Mr. Hui's thoughts on the recession and how it would affect his company. Like a true entrepreneur, Mr. Hui said he and his company "had to work better and harder." As for the credit crunch and possible solutions, he said the current environment was something "none of us had seen in our lifetimes." He praised the government for "reacting very quickly," but indicated there was "no overnight fix." He expects a turnaround in late 2009 or early 2010.

I asked him who his heroes were. This question surprised Mr. Hui, who appears to be a very humble person. (Few CEOs would have spent time with a small shareholder at the annual meeting.) Mr. Hui, after some thought, said he found inspiration in the Bible.

When asked whether his company would pursue other areas while the economy recovered, Mr. Hui remained steadfast--he said Pericom's "focus will not change," and his company would continue to "enable high-speed connectivity."

It's always fun to see a smaller company take on the competition and not only survive, but flourish. Most--88%--of Pericom's net revenues come from Asia (see page 22 of 10K). If you believe Asia will lead the way out of the current recession, then Pericom may be worth a look. Its stock price is very volatile, which is typical for smaller companies priced in the single digits. Sometimes, however, that volatility can work in your favor. Yesterday, December 16, 2008, Pericom stock increased around 20%.

Disclosure: I own only a few shares in this company.