HQ:B/B>1,strong bookings in 7/00,strong 2H,BUY,tgt$65
Date: 7/26/00
LSI 2Q:00: In Line Quarter; Lowering Our Price Target to $65 from $90.
* LSI reported 2Q:00 revenues of $644.3 million, up 4.7% q/q, missing our top
line estimate of $670.5 million. EPS for the quarter before goodwill was
$0.29, which met both our and consensus EPS estimates of $0.29. Gross margins
of 42.9% were up 50 basis points q/q due to improved utilization in the
company's fabs and the ongoing ramp at Gresham.
* We believe the book-to-bill for the quarter was solidly above 1. 1Q:00
bookings set a new record for the company. We believe that the momentum of
strong bookings has continued into the month of July thus far.
* Increased order momentum (primarily in the 0.25 & 0.18 products) is causing
the company to pull in its capacity ramp plans at Gresham by 6 months causing
the company's GMs to ramp at a slower pace for the balance of this year and
next Vs previous guidance.
* Moving forward, we are slightly tweaking down our revenue numbers while
keeping our old EPS numbers primarily by lowering the operating expenses to
compensate for lower guided GMs.
* Communication revenues in the quarter (networking, broadband including
optical switching, wireless, set top-boxes, etc.) continues to grow at a
faster than previously anticipated pace. The company's communications business
is now expected to grow to 50% of total revenues by end of the current quarter
Vs previous expectations of getting there by year end.
* We will look to incrementally get more positive on the story during the
second half as a lot of the currrent bookings transform into higher than
expected revenues.
* We are maintaining our BUY rating and are lowering our price target from $90
to $65. 2000 E Previous Est 2001 E Previous Est
Q1 EPS $0.26A $0.26A $0.39 $0.39
Q2 EPS 0.29A 0.29A 0.43 0.43
Q3 EPS 0.32 0.32 0.47 0.47
Q4 EPS 0.37 0.37 0.51 0.51
FY EPS 1.24 1.24 1.80 1.80
FY REVS (M) 2,775.5 2,813.6 3,720 3,787
CY EPS 1.24 1.24 1.80 1.80
CY P/E 33 33 23 23
FY Ends Dec Current Price $41.00
52-Week Range $21-90 Market Cap (M) $14,478
Shares Out (M) 353,120 Book Value $6.14
Net Cash/Share $2.67 P/S Ratio LTM 6.1
P/S Ratio FTM 4.5Balance Sheet
Cash at the end of 2Q:00 increased to $942.5 million up from $868.2 million in
the prior quarter. Inventory days increased to 71 days, up from 66 days in the
prior quarter. DSOs decreased to 56.5 from 58.7 q/q. |
