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Technology Stocks : Alliance Semiconductor
ALSC 0.8100.0%Jul 10 5:00 PM EST
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To: Ram Seetharaman who wrote (5462)7/23/1999 1:02:00 AM
From: Don Lloyd   of 9582
 
Ram -

(...ALSC won't be able to match the 30+ % profit margins of the Chip leaders like LLTC, because it will take them years to set up shop, neither should they try to mimic companies like Micron (pre-tax profit margin of 5 %) by doing business in huge volume to generate paltry profits...)

Your reasoning seems sound, but as an aside, it may often be as misleading to try to group chip companies as it would be to group companies with red brick headquarters buildings.

For example, LLTC doesn't achieve its 74% gross margins, etc., simply because it's a chip company, but rather because it uses its scarce analog engineering expertise to supply valuable solutions to significant customer problems. The actual chips can be considered as encrypted problem solution packages, not easily duplicated since both the designed circuitry and the specialized in-house fab processing are necessary to meet the analog performance requirements in the markets addressed.

Regards, Don
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