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Technology Stocks : LSI Corporation
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To: frank/fla. who wrote (13308)6/29/1998 8:39:00 PM
From: thomas hayden  Read Replies (1) of 25814
 
I don't have LSI's balance sheet in front of me, but I'm wondering do they have that much money in cash, or will they borrow to pay for the deal. If they do have to borrow then look for a secondary somewhere down the road(and at a higher stock price) to get rid of the debt.

The timing of this deal was perfect. Yesterday's article in Barrons was good for a point, point and a half pop in the stock. The takeover due to dilution of assets, and short term earnings setback (writeoffs) would probably taken the stock down a point or two, much like what happened to telephone when it bought TCOMA. So the net net result for the day was a wash.

The purchase price was pretty darn cheap. Doesn't seem like much of a premium if at all. I know we don't think Wilf is too bright, but he can't be completely stupid. If he didn't think there was room to grow this company he wouldn't have given away 750 mil of his hard earned cash. I hope he can combine parts of the companies and raise their margins. That would be a big hit. Short term, not real great for the stock, in a year it should add another 10 to 15 points onto the stock price.

One other thought, if they paid 750 mil, and the company earns 70 mil a year that is an annual return of only 9.33%. Not great. I hope this combo works better than the USRX/COMS deal. They are still waiting for the payoff on that one.
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