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Technology Stocks : Lattice Semiconductor

LSCC 62.49

-1.0%

Nov 6 3:59 PM EST

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To: Rudi Strobl who wrote (4)	2/23/1996 2:07:00 PM
From: E_K_S	of 339

The volatility for Xlynx and Altera (eg. beta) is much high than Lattice. Look at the option preminums on all three. Also fund managers prefer Altera over Lattice but I believe this will change once they see that Lattice is trying to expand their high density business which generates much higher margins. This will be reflected in their earning growth which probably should start with their July'1996 reporting period. Altera's rate of growth in earnings is priced at around 40 times earnings BUT if they stumble there is more risk on the downside! I prefer investing is steady growth companies like Lattice which is growing at around 25% and recently sold for only 15 times trailing earnings. The kicker is that Lattice has a solid base in the low density business (with low margins) which will allow them to continue to get soild earnings for the future. As they expand their high end business a larger contibution to earnings (at the the margin) will be obtained currently not priced by the market. Lattice has obtained waffer capacity through 1997 with a new deal signed with UMI in Tawin. The CEO has a very long term goal to grow Lattice throuh the year 2000 with partnership deals in CHINA. The CEO is Chinese and understands the business culture. Finally, Lattice used their recent stock offering to pay for extra wafer capacity. The balance sheet is solid with no debt and very good cash flow. As an investment Lattice to me is the safest of the three players ALTERA, Xlynx and Lattice. They have shown several quarters of positive earnings releases and I see this continued for the future. It is not clear how long Altera or Xlynx can maintain their huge growth BUT you do pay for it in the large PE preminum. The industry to me is solid and should remain strong as long at telecommunication companies continue to grow. This industry is not as vulnerable as the commodity industry like Drams or Srams. Hope this helps. To generate income you might sell calls on 1/2 of your position two months out. I saw that the market was paying $1.00 for the May or June 45 calls when the stock was 33. I am thinking of selling these if we see another run with SOX say up to 215-220. EKS

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