PE is one metric and one metric alone. Ditto for PSR ratios. PEG ratios. Yet, if we compare the entire group, we can get a feel of the overall valuations of the segment and which companies perhaps deserve a premium to their peers. We dig down to margins, cash flow, growth objectives, mass market niche targets and execution by management. From that study, not all are created equal.
As you well know, Broadcom is one of a core semiconductor company in the communications components chip sector. PMC-Sierra, Broadcom, Applied Micro Circuits, Conexant and Vitesse are all very important players in the space. We can throw in Intel, Agilent, Infineon, Lucent, TranSwitch and TriQuint as well if we want to cover the entire areas of physical media dependant, physical layer, framing, protocol handling and higher layer functions in the space. Some address areas that others don't and some overlap each other as competitors. I continue to see it as a very important segment that will need many more years to fully play out as we move through the merging of optical components and electrical components inside the communication boxes. Personally, I feel more comfortable holding shares of several in the space rather than just one for the longer haul. Broadcom happens to be one in the group I hold and understand why it recieves a premium to some of its peers.
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