From: Cooters Saturday, Mar 11, 2000 10:37 AM ET
Reply # of 7447
LSI Logic Shares Soar on Optimism for Focus on Communications
--From AOL news. See CDMA section.-- Cooters
Milpitas, California, March 11 (Bloomberg) -- LSI Logic Corp., the No. 1 maker of custom semiconductors, will outline its plans for wireless communications and Internet equipment at a meeting next week in Phoenix.
LSI shares have doubled this year on sales of its chips that perform the functions of many semiconductors. The chips save time, money and space for customers such as Cisco Systems Inc., the No. 1 maker of Internet equipment, Nokia Oyj, the top cell-phone maker, and Sony Corp., which uses LSI's products in its PlayStation video-game console.
Chief Executive Wilfred Corrigan and other executives will tell 100 analysts and investors that LSI ``is transforming itself into a bona-fide communications company,' spokesman Kevin Brett said. The conference runs Thursday and Friday.
``It will be a `love-in,' ' said Dan Myers, a Lehman Brothers analyst, who rates LSI a ``buy.'
Investors already have found a lot to love about the Milpitas, California-based company. It's the third-best performing stock on the Standard & Poor's 500 index this year, following its performance as the fifth-biggest gainer last year, when it rose more than fourfold. LSI shares rose 5 3/8 to 88 1/4 yesterday.
``I always like a company that I can be right about in a lot of different ways,' said Dan Niles, a Robertson Stephens & Co. analyst who rates LSI a ``strong buy.'
Mix and Match
Niles said he likes LSI because it's not a startup company ``that wants to be the next big thing. This is a real company that is growing quickly.'
LSI designs and makes so-called system-on-a-chip semiconductors, drawing from a proprietary library of more than 400 ``cores.' These cores carry out the tasks of various semiconductors and can be mixed and matched and made into a single chip that performs the functions of many.
The most cores that LSI has put on a single chip was 11, said LSI's Brett. That was for a chip that went in to a digital video disc, or DVD, player.
Although LSI makes chips that go into consumer entertainment products such as digital cameras, TV set-top boxes and game consoles, the company said it's sharpening its focus on making chips for wireless communications and networking gear.
Sales of such chips accounted for about 40 percent of LSI's 1999 revenue of $2.09 billion and are forecast to increase by 60 percent a year.
CDMA Chips
``Cisco and the others rely on LSI to build high-performance, custom chips that do different things on a single chip,' said Seth Dickson, a Warburg Dillon Read LLC analyst, who rates LSI a ``strong buy.'
Dickson said LSI's ``dark horse' technology is making chips that use Qualcomm Inc.'s code division multiple access, or CDMA, technology, the world's fastest-growing cellular standard. CDMA is used by more than 50 million people. Chips based on the technology go into cell phones and could be a big winner for LSI, he said.
Market researcher Dataquest expects CDMA handset sales to rise sevenfold to 265 million units in 2003 from 38 million last year, said LSI's Brett.
LSI said it's one of only three companies besides Qualcomm that is licensed to make CDMA-based chips. The others are Intel Corp., the world's largest chipmaker, and closely held PrairieComm Inc. of Rolling Meadows, Illinois.
``This is relatively new for us, but it has a large potential,' Brett said.
Fab News
Analysts will want to hear about LSI's chip fabrication plants, also known as fabs, at the conference. Unlike many semiconductor companies, LSI makes most of its own chips at its three fabs, in Gresham, Oregon; Colorado Springs, Colorado; and Tsukuba, Japan.
Having its own plants gives LSI an advantage over competitors that are fabless and use other companies' plants to make chips, said Danny Lam, an analyst at FHI Research.com Inc.
``We are beginning to see capacity problems with demand exceeding supply,' Lam said. ``LSI may end up picking up a lot of market share from the fabless companies such as Qualcomm.'
One thing that may be giving investors pause is the recent run-up in LSI's share price, said Jeffrey Pittsburg, president of Pittsburg Institutional Inc.
``They are a good company and have gone from undervalued to fairly valued,' Pittsburg said, who has a ``hold' rating on LSI. ``The only way you can buy them now is on the dips.'
Mar/11/2000 10:12 |
