Thanks for the well written reply. I must agree with you about the benefits of the current era since my portfolio is about 80% technology.
The tech boom will roll on. Remembering the big picture that the telecoms are under intra-industry competition to do massive forklift upgrades, broadband, wireless, etc for the next decade helps one sleep at night. And all the other gadgets that are appearing, and storage requirements is hugely bullish for LSI.
OK you are a long term investor and the recent action is a market event. Market events only help or hinder short term investors. You are obviously trying to go to where the puck will be in say 10-20 years. So the discounted cash flow versus the price paid has to leave room for returns, and that becomes a lot less reliable when the first 10 years are already discounted in prices (because everybody's mother has decided its a new era, they're missing the boat and must "get into the market"), and the company's competitive position is hard to project past 2-3, maybe 5 years. So I question whether this market necessarily benefits a long term LSI investor unless the company can use its current high stock price to snap up competitors and start-ups, and is a long term gorilla not a xerox. I know LSI bought Seeq and storage, but I'd like to hear more on the gorilla case for LSI.
If a company is a long term gorilla, I still think too high a stock price could limit future appreciation. Eg. CSCO at $600B. OK it doubles to $1.2T. Is that possible? Maybe, but I find it hard to belive that in 10 or less years it's going to quadruple to $2.4T. There become problems like the proportion of GDP that represents, an arithmetical issue I'm sure engineers would understand. And if it can't quadruple in 10 years, then maybe it's only an average investment. But maybe it can go to $4.8T -- that would be worthwhile.
However, I'd say it's fair to stick with LSI now as they should go very strong for a couple of years. Given the strong demand situation the competitive landscape probably won't change on a dime unless there's another financial crisis out of nowhere like in 98. And who knows maybe they are becomming a Gorilla. I wouldn't be surprised if they easily returned to their year high. As an ASIC leader they should be perfectly positioned to capitalize. $25B mkt cap may not be too high.
Maybe they'll get to $300B like intel and sell chips for an ASP of $220? Tell me more. What are the Japanese up to? Maybe the Sony Playstation will blow away Intel, making the way for LSI. After all, the playstation chip is so powerful now, they're saying it's a possible war weapon I just saw on CNN.
Anyhow, I wish you best of luck with LSI. And I'd like to hear any views re their long term position. |
