I guess we were getting a little close to the old price target. Time to raise:
06:53am EDT 29-Jun-99 Salomon Smith Barney (WESTMONT 1-415-955-4933) VTSS
VTSS: Raising Price Target
--SUMMARY:--Vitesse Semiconductor--Semiconductors
--EARNINGS PER SHARE--------------------------------------------------------
FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year
Actual 09/98 EPS $0.13A $0.15A $0.18A $0.21A $0.67A
Previous 09/99 EPS $0.19A $0.22A $0.23E $0.25E $0.89E
Current 09/99 EPS $0.19A $0.22A $0.23E $0.25E $0.89E
Previous 09/00 EPS $0.27E $0.29E $0.31E $0.33E $1.19E
Current 09/00 EPS $0.27E $0.29E $0.31E $0.33E $1.19E
Previous 09/01 EPS $N/A $N/A $N/A $N/A $1.50E
Current 09/01 EPS $N/A $N/A $N/A $N/A $1.50E
Footnotes:
--FUNDAMENTALS--------------------------------------------------------------
Current Rank........:1H Prior:No Change Price (6/29/99).....:$65.69
P/E Ratio 09/99.....:73.8x Target Price..:$80 Prior:65.00
P/E Ratio 09/00.....:55.2x Proj.5yr EPS Grth...:40.0%
Return on Eqty 98...:17.9% Book Value/Shr(99)..:5.01
LT Debt-to-Capital(a).65% Dividend............:$N/A
Revenue (99)........:279.40mil Yield...............:N/A%
Shares Outstanding..:81.9mil Convertible.........:No
Mkt. Capitalization.:5380.0mil Hedge Clause(s).....:
Comments............:(a) Data as of the most recently reported quarter.
Comments............:
--OPINION-------------------------------------------------------------------
Vitesse Semiconductor derives 80% of its sales from broadband
communications applications, including SONET/ATM, Gigabit Ethernet, Fibre
Channel, and dense wavelength division multiplexing (DWDM) applications.
Lucent is Vitesse's largest customer at roughly 20-25% of sales.
Automated test equipment (ATE) component sales account for approximately
20% of Vitesse's sales, with most shipments going to Schlumberger and
Teradyne.
Vitesse had an unusual situation among Internet IC suppliers over the
last six months as it brought a significant chunk of new capacity on
line. As a result, lead times shortened and book-to-bill ratios for the
company have fallen. In addition, Lucent has been in the process of
out-sourcing more production to contract manufacturers, distorting the
order picture. The company appears to have weathered this transition
period reasonably well, however, and we believe the deterioration in
business visibility has stabilized or marginally improved in the last two
months.
Our $80 price target for Vitesse is based on 45x the implicit 2001
earnings power of $1.70-1.90. This is a lower target multiple than we
have used for either of its two best comparables (AMCC and PMCS), which
may prove conservative.
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