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Technology Stocks : LSI Corporation
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To: shane forbes who wrote (18974)6/20/1999 5:45:00 PM
From: Grand Poobah  Read Replies (1) of 25814
 
Shane,

Thanks for your thoughts. I agree that the 12% growth figure for this year seems low. Was it Corrigan that said the SIA always predicts growth of around 10-15% but that in reality it is usually either 20-30% or close to zero?

For LSI, note that last year was the year of big cap exp. In theory this year should be the year of large generation of free cash flow.

Interesting. I had not really synthesized into my big picture the fact that LSI was investing in capital last year at a time when it was unpopular and that the foresight/determination should pay off for them now in the upturn. LSI's timing was a little early, while others' will probably be a little late, so while LSI took a hit in the fall for their investment, it should pay off in the long run, probably better than for those investing in capital a little late.

In particular I suspect there is a strong inventory build going on right now.

Do you really think there is an inventory buildup going on? Or is it just an Asian recovery combined with continued domestic strength and growth? I thought the speculation in the fall/winter was that part of the tech weakness was due to more companies moving to the Dell-style just-in-time inventory model. If that was true, there should be no need for inventories to build up much again.

I do believe that nevertheless this will be a long road. Among the interesting points - (1) consolidating manufacturing (that is getting the Taiwan companies to do the manufacturing) means you have lesser capital at risk and you have flexibility

I agree that the maturation of the foundries has been and will continue to be a plus. It will be interesting to see how the much predicted (and to a lesser extent realized) movement of the integrated device manufacturers toward outsourcing fab capacity plays out. I have a feeling that the foundries are mature enough now that it will play out for the benefit of the industry as a whole and not to the detriment of the fabless players as some are suggesting. Hopefully that all works toward making the good road a long one as you suggest.

Regards,
G.P.
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