Hi Eddy - It's still quite early in the cycle. You do obtain quite good leverage with the Leaps but the key will be to devise an exit strategy that allows you to sell or hedge your gains. When these stocks run, it's very easy to get caught up in unreasonable price expectations.
LSI does have a few interesting business developments that will add some spark to this next move higher.
A). They will spin off their storage division probably by issuing a new IPO stock.
B). LSI has a very attractive portfolio of new products especially in their DVD components. Their earlier purchase of C-Cube was an investment the company made several years ago (they paid big bucks) which may now finally pay some big dividends by generating some added new revenues.
(Note:C-Cube (LSI Logic) Designs, develops, manufactures and sells semiconductors, software and systems for digital video applications. Acquired by LSI Logic in 2001.)
C). The company will have completed their facility restructuring. Their main manufacturing facility will be located in Gresham, Oregon where they have enough plant capacity for many years of growth at a very favorable cost structure. It's possible, LSI may sell part of this capacity (for the right price) to some foreign partner. Their long term facility contract with the State of Oregon and City of Gresham does allows this.
(http://www.us.design-reuse.com/news/news6509.html)
From the article: "...LSI Logic signed a definitive agreement to sell the company's Tsukuba, Japan manufacturing facility and extend its foundry usage. The transaction is scheduled to close in the fourth quarter. When this action is finalized, LSI Logic will have completed the consolidation of its internal manufacturing at the company's Gresham, Oregon campus, supplemented by strategic foundry engagements...."
D). Good operating results reported in Q# 2003:
# Gross margin of 41 percent.
# Generated positive operating cash flow for sixth consecutive quarter.
# Cash and short-term investments total $987 million at end of quarter.
Earnings must follow to support any significant move higher in price, but I still think $25 - $30 is doable in the next 24-36 months.
I think any way you decide to invest will eventually make you some money. IMO CEO Wilfred Corrigan has done a reasonable job of restructuring the company. Let's hope that the economy can sustain a healthy long term growth recovery. We should know more about the semi-cycle trends and new order rates as the year progresses.
Good Luck
EKS |
