Shane: I've basically been away the last month attending to my newborn, so I haven't had the time to respond to and comment upon your posts, which as always contain lots of great thoughts, refreshing opinions that are right on the money and as usual a few misstatements of fact.
[referring to me, Jock] …bought LSI heavily in early 1998 around the time I started to reinitiated my position
That is absolutely true. I made two major purchases in Jan and May '98, which I expected to do very well on very quickly. I felt that the then two plus year drought in the semi market was about to end, and I wanted someplace to park a chunk of trading money, while I studied for the MCATs in mid August, the entrance exam to med school.
Whether this was based on what I had said or not I don't know.
Not true. I had traded LSI almost on a daily basis from '94 to late ‘97, so I was very familiar with the company. Always loved the way the specialist moved the stock--still do. It's a great trading vehicle at the proper volume..
The fact that he had to sell some for a loss (I recall a tax selling loss comment somewhere but I may be mistaken?) or missed out on the opportunity cost of not buying until 10 3/4 has irked him (& others) and so he let loose vindictively a few days after I came back
Excellent memory Shane. I divested of my position in LSI at about 14 for tax loss purposes, since I had returned to trading. And I took a relative hiatus from this thread, but I still continued to post. Obviously I took a big time beating on the stock, since my basis was 23. By mid December, I felt that LSI had begun to turn things around, and I reinitiated our position at a lesser number of shares, (by about 40% less) with an average price of 16. Thus my base price (for breaking even on my overall investment) is right around 30, which is nowhere near what I would have liked it, but I was a fool for not shorting the stock on Tuesday afternoon August 18th, 1998. It was obvious that something was terribly wrong, since the other semis were up on the day, and LSI was selling off furiously from about noon on. Had I been in a trading mode, and not been very tired from taking the test I might have reacted more appropriately, but that's life in the big city.
If I recall correctly I had one of the lower estimates in that contest at 31 or so that Beach had run. And why? Because I knew that the semis were in big sh** trouble by Mid March
You clearly had one of the lower estimates, but as WE ALL REALIZED, the estimates were clearly off, since the winner (Rairden) was the lowest and he wasn't that close. On the other hand, your representation that you knew the semi market was in big dodo by mid March is just simply not confirmed by your writing. To the contrary as the quote from the following post indicates, you were wildly optimistic about LSI just after their April 1998 CC.
The beginning of the post reads:
c. call just ended:
Let me summarize with just one statement:
EXCEPTIONAL MOMENTUM STRENGTH SEEN IN UNDERLYING BUSINESS!!
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This is the best sense I have ever seen of LSI's core strengths since early 1996. (Interestingly today and yesterday I got truly exceptionally good reads (A++) on several of the companies I track - most for the first time ever. As people here know I tend to put a portion of my portfolio in s/t dogs l/t potential stalwarts type companies. It was quite remarkable to see so many coming together all at the same time. Thank you big guy up there! (Of course those dudes at BORL messed up my party s/t...) Must be an alignment of the moons. Again I don't care to predict s/t price moves and the tentativeness in the overall market but Shane just pushed LSI to IMMEDIATE EXCEPTIONALLY STRONG BUY.)
Seems like just the opposite of what you recently wrote Wiz
You further write:
Again boards are not run for the good of one and all since all the players are not equal - most take too much and contribute peanuts; the owners became multi-millionaires thanks to much 'free' effort put forth by others; many know very little useful; others are good for one-liners and on and on.
Very true, and you have been a tremendous contributor, one of the very best, but that does not obviate my right to challenge your numbers when I feel that they have been reckless and irresponsible.
And to repeat (for the very last time)-- I feel that your use of $1.85 Billion in revenue for the year 1998 was a reckless and irresponsible number to use as a basis for comparing revenue growth in the year 1999. Now if you go back to my original post, that is what I said, and I have substantiated just why I feel that way, and the only valid figure for comparing revenue growth for the rest of '99 is the revenue figures from 4Q '98 and 1Q '99, which reflect the reality of LSI post Symbios merger. By contrast of course, your $1.85 billion does not reflect the reality of LSI post Symbios merger. Your figures essentially use Pro Forma figures that ware not allowed because they overstate revenues and profits in the period immediately post merger which is precisely the criticism I had of you. And you have continued to try and squeeze these figures in saying that you got them from LSI, but that you are missing $90 million. Yes Shane, it is you who are missing $90 million in sales (actually a lot more) because it never happened—and I assure you that you will see no reference in tomorrow's press announcement that refers to the sort of figures you are trying to cite as last year's LSI's sales. At the very least you need to have the intellectual honesty to point out that these are not actual sales, but are in fact Pro Forma sales, the very type that are eschewed by various Accounting Standards
Speaking of tomorrow's CC, I would like to see some forward looks on CDMA (besides we have the best chip in the business), Fibre Channel, and the diminishing prospects for ATM, given Cisco's recent purchase of StratumOne Communications
Clearly I am not going to attack the cheerleaders, because quite frankly, I don't think that it's worth it, and while I don't disagree with their right to post, I don't read that much into their posts with the exception of measuring sentiment. I also agree with you that you have an absolute right to continue your contretemps with me, since I think that your attacks on my posts generated a tremendous amount of information, and quite frankly I find that spats such as ours provoke a lot of thought. Thus, I disagree with the BS about taking it to PM, since these are very interesting posts, and the very people who post the BS about taking it private generally don't contribute that much info.
All this P/E stuff and P/S stuff is ok (the P/S stuff is better BTW) but it still is way way off base. There is a right way to do this but it takes a sh**load of work. And since there are so many useless sponges off these boards I have no intention of showing how 'better' numbers are calculated.
I agree. There are a significant number of variables that need to be incorporated into valuing a semi stock with the proviso that the market will always overreact at the top and bottom of a cycle. Thus one needs to work with the assumption that the top and bottom deciles in a semi stocks price cycle are flat out goofy.
For starters, I would break down LSI into at leasr four components on a price to sales ratio--Gate Array, Storage Systems, High End Custom Chips (ASICs and Coreware), and Design.
About three months ago, I assigned different price to sales ratios to these four different market segments in which LSI competed, and I came up with a fair value price in the low to mid 50s—just about today's price.
Since you might feel like attacking me, and the other stuff is really mined out, why not take a shot at this stuff.
My comparison was simplistic, but I analogized the four different segments to other comparable stocks. Clearly, I undervalued the Storage Systems business, since I assigned it a P/S value of 1. The business is doing great--although not as great as Storage Components. Storage Systems deserves a P/S ratio of at least 2 and possibly 3—not the 10 or 11 that you would like to assign it because it's a “competitor” to EMC. Nevertheless the Symbios purchase was so well timed (and quite frankly lucky) that it is possible that they could divest of the entire storage systems division at a price that would fund the entire purchase, thus giving them the components division for free.
I gave Gate Array a P/S ratio equivalent to the P/S ratio of Micron, simply because much of what is now Gate Array is now either government contracts or old business that is not going elsewhere. In short, it's money in the bank, which is going to be lost much more slowly than previously had been lost. The design business (Mint) was assigned a P/S ratio equivalent to Cadence, although Mint is growing much faster than the larger design houses.
But the real question is how to value the largest portion of LSI's major business. And it is here, where things get interesting.
Clearly, PSI is just clipping coupons, and it is clear that this will be a cash cow for quite some time--over at least four to five years. There has always been a misunderstanding as to how quickly PSI business would deteriorate, and my guess is that in third world countries, this business will be gung ho for a long time to come. Thus, because there is a real certainty to this revenue, there needs to be a high ration assigned to PSI, and when it becomes clear that PSII is a success, an even higher P/S ratio--possibly along the lines of 4 to PSI and 7 or 8 to PSII. The next critical question is how to value Coreware,
(By the way, you are way way off on your percentages as they pertain to Coreware and Standard Cells—far too low on both estimates. Coreware will be about 50% of LSI sales by the end of the year, and LSI was the world's leader in Standard Cells sales ( outside of company sales) last year.
The critical issue is the length of Coreware sales compared to the previous ASIC and Gate Array sales--is the product cycle longer? That to me is the key to valuing LSI, and it is the sort of question that I am looking for in tomorrow's CC. My understanding in talking to IR is that Coreware does have a longer shelf life, and as such, the increasing sales of Coreware would justify a higher P/S ratio.
The beauty of Coreware product is not only the stronger IP, and its longer shelf life, but it broadens LSI's product base, so that they can compete more effectively with the PLD/FPGA guys.
As far as your soft headed reminiscence about the good old days of SI and the Internet ('96) , I can only say that the days when Shane could post a reckless piece of garbage and it would go unchallenged are over, and quite frankly, I haven't seen a fresh thought out of your as it pertains to LSI in over a year. If you want to look at fresh perspectives over the past year, it belongs to people such as Tony and myself on Symbios, Patrick on fabs, E and Moonray on TA, and (Bless her heart) K on the true costs of the Gresham ramp.
And, despite the fact that the percentage increase in SI members has declined, SI has improved because there are more informed posters who are able to challenge the nonsense that is posted.. Simply put, SI works best because there is some measure of accountability. For example, the fact that there was control over your rambling remarks demonstrates how effective SI can be.
I can think of a good 50 threads that have worthwhile information. And if one judges by site hits, it is a very successful thread. Fibre Channel Doug Norgren is one that immediately comes to mine..
If I want a visionary I don't need to look any further than my brother a Stanford trained lawyer who authored a report for his employer, the Postal Service, which urged dramatically reduced capital expenditures fifteen years ago simply because he foresaw the ARPANET growing into a commercial venture, and with it increased competition form overnight package services as well as ultimately the climate for private delivery of first class mail (which of course has not yet happened) (And what is this visionary doing these days on Internet? Easy. He got divorced a year ago so he ‘s out on the Internet trolling for available and suitable female talent.
Similarly, your self righteous harangue about storage is truly sad, Storage?. Yeah Shane. I have heard of Storage. Bought 1000 shares of a company called Analex in '66 as a 16 year old with my earnings from previous stock purchases from my caddy earnings. Had Texas Gulf Sulphur. And then Syntex. So your criticism that I don't know is absolutely ludicrous. Analex was a storage company that was eventually bought by a company named Mohawk data Systems. Made a five bagger on that baby, before, I was fortunate enough to pull in my rod and reel and go to law school thereby missing the big-time bear market of 73 and 74.
Similarly, your comments about Intel's forward while interesting, miss the most important point as it pertains to LSI. And that is that Intel's server business is exploding, which bodes extremely well for LSI storage components. Even the most casual glance at the numbers reveal that INTC's ASPs are down to such an extent that the only factor holding up revenues at INTC is server business.
Monopolies are not a good thing.
Worse yet are undefended ill-equipped competitors whose prescience in a business prevents or at least dissuades the entry of legitimate competition. AMD is a terrible company that should be allowed to die a quick death rather than being propped up in the name of “competition
By the way, I am looking at 10% increase in revenue and $.23 a share.
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