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Technology Stocks : LSI Corporation

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To: uu who wrote (25691)	11/27/2003 4:27:01 PM
From: E_K_S	Read Replies (2) of 25814

Hi Addi - I am not sure what the long terms plans are for LSI but our CEO is getting ready to retire and I believe this is the last up cycle he will oversee as CEO. If indeed this is his strategy, he seems to be setting up his plate for various exit options. Remember LSI recently bought the old storage "raid" company Mylex from IBM for $0.40 cents on the dollar from what IBM paid Mylex. It was a great purchase and helped LSI generate excellent near term free flow cash flows. However, the big money LSI has invested is in their Gresham FAB facility located in Oregon. LSI obtained huge tax incentives from the State (a 15 year agreement) that makes this facility quite profitable. At the 1/2 point through their agreement with the State LSI continues to make good on their long term commitment, there have been rumors of a partnership with some other parties to utilize the excess capacity of their facility. (http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/106751860438070.xml). My thought is that if LSI spins off their chip division, it must be to these partners that have a vested interest in the Gresham facility. I suspect it could eventually be an Asian Fab manufacturer. The long term plan IMO would be for LSI to propose an offer to one of these partners when we are in the peak of our next cycle (perhaps June 2004). By that time, the Gresham facility will be at full capacity and a very efficient manufacturing facility w/ options (and tax incentives) for further expansion. Remember that our CEO purchased a bunch of stock with his own cash last year at an average cost of $7.00 per share. If he is ready to retire soon, this would be a good strategy for him to pursue. We will probably know within 24 months. I will probably sell my holdings in the next 24 months (timing the semi cycle is hard) if our CEO spins off their chip division. I will follow his lead. It is good to see that LSI has plenty of free flow cash flow to pay down their bond debt. This must occur first before any significant move in the stock. I believe this convertible preferred debt had an option to convert to stock at some higher level ($27 pre split or around $13/share post split - just from memory). This will allow a significant move now above $13 and may now shoot for my cycle high target of $27/share. Finally have you seen the current prices on DVD players! LSI produces many of the chips in these new machines. I just bought a fully loaded DVD player from WalMart for $43.00. Now I can send DVD and SVCD's to my family and friends. When I had SVCD's that I produced from my camcorder, my family could never view them (no machine w/ player). Now I just have Walmart send them one and they can view my most recent videos on their TV set. Enjoy your thanksgiving and wish you and your family the best over this holiday period. I really think there is great value in LSI and we do have a CEO with a vested interest to see significant value is received for all the shareholders looking to 2004 and 2005. EKS

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