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Non-Tech : Amati investors

AMTX 1.425

+5.2%

Dec 18 3:59 PM EST

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To: SteveG who wrote (17752)	5/15/1997 5:08:00 PM
From: Andreas Helke	of 31386

[Amati's position in the ADSL field] Strength and weaknesses of the small xDSL players. Amati - probably has the most experience with ADSL technology and therefore has the chance to become an important partner of many other companies. They are too small to compete with all the other companies in the field on their own. Amati has a poor balance sheet. There is currently not enough cash available to last till they become profitable. I imagine that asking for prepaiments is influenced by their cash flow problems. If they could get those prepaiments they could avoid a secondary on unfavorable therms. I think that Amati already has all the business that they can handle with their current partners (Motorola, NEC, Siemens, Texas Instruments) and is only interested in additional deals if the terms are favorable for Amati. I assume that Amati is ready to license its patents on terms that are acceptable to the companies in the field. But if you want services beyond those patent licenses you have to pay Amati's prices do it yourself or go to Aware. This of course creates the risk that the opposite camp gets too big and can offer cheaper prices due to higher market share. Aware: I don't know if their tendency to license cheaply is good for the company or not. If the market gets really big and Aware's technology catches the majority of this market it might be very profitable to just collect small fees for a big number of devices. Orkit - I don't know enough about the company to comment. PairGain: I don't really understand the ADSL strategy of that company. They don't seem to believe that the ADSL market takes off in the near term future. But despite off developing their own falcon chipset they make a deal with ADI/Aware for ADSL chipsets. Westell - heavy reliance on CAP modulation may be good for some early deployments but there is the risk that it is a source of bad news if CAP gets replaced by DMT. We still do not know if CAP will stay with us in the long term. I think that is more of a problem for the stock price than for the company since Westell will also use DMT. Westell managed to do a secondary at a very favorable stock price and therefore has a very healthy balance sheet. About the current stock price: I have no idea if it is reasonable or if it is too high or too low. I think that Amati has a chance to get a multi billion market cap if they do well and if they are not bought by someone else before they grow to that size. But I don't have any idea how probable such a favorable outcome is. Therefore I plan to stick with my Amati shares until we see how the race in the ADSL develops. Nevertheless I will sell quite a few shares if the share price rises above $30 and then falls back to $28. Andreas

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