Vitesse Semiconductor Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Vitesse Semiconductor

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Duane L. Olson who wrote (1233)	2/26/1998 5:46:00 PM
From: slob	Read Replies (2) of 4710

Duane: Understanding VTSS's true value. I've read a lot about the likely demise of VTSS and concluded that this event is somewhat overstated, to say the least. All this talk has caused me to reconsider the true source of VTSS's value. Most of the gloom and doom starts with something like VTSS is a GaAs house and that BiCmos or SiGe will underprice GaAs and VTSS's margins will shrink resulting in them going out of business. This is a difficult statement to refute at a technical / pricing level, however by accepting this you fall into the trap of assuming the VTSS's value rests in its technology leadership and/or that its markets are price sensitive. In my opinion GaAs is the sexy tag that hides a company whose aim is to emulate LLTC and MXIM. If you look closely at VTSS you'll find a company that is managing its growth very nicely and has a catalog type product offering and regards it's engineers as their most valuable asset. The important thing is that this is a catalog type product so it has many customers that buy a limited number of parts. This makes VTSS very different from other GaAs makers like ANAD, ANAD ends up selling into large OEM accounts for things like cell phones. ANAD's customers are very aware of the alternatives and will switch whenever the time is right, for them. By contrast VTSS's customers (the actual buyers) are often smaller companies that have huge profit margins and value their current design more than the increased gross margin that designing in a cheaper part could produce. Also in the areas where VTSS sells large numbers they are somewhat protected by the qualification procedures required to introduce or update a product (all the telecommunication rules and reg.) Bottom Line. VTSS's customers are, for the most part, NOT price sensitive (So underpricing them is not a viable attack). Second VTSS is a small player and can easily grow without having to compete for price sensitive sockets. So what's a good valuation method for VTSS? In the long term, when all the technology advantage is lost, VTSS will look a lot like LLTC. So this means a mature VTSS (Rev around $800M) it is worth about 8 to 10 times revenue = Market Cap ($6B to $8B). In the mean time it should be possible to maintain growth rates of around 30% with 30+% earnings. At these growth rates VTSS is still underpriced IMHO. Anyway, I'm interested in hearing from some VTSS bulls as to where they think the company is heading. Slob

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next