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Technology Stocks : LSI Corporation

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To: Wolf 2 who wrote (13019)	6/13/1998 11:02:00 AM
From: shane forbes	Read Replies (1) of 25814

(Barron's mentioning semis and semi-equips) I read this article a long time ago about the difficulty in becoming a 3 billion $ in sales company when one is a 1 billion in sales company. It is quite easy to grow if you are small and a niche player and then as you start bumping against the big macro-effects and the big boys (as you near 1 billion in sales) things grind to a quasi-halt as the big boys' economies of scale pose a competitive threat. LSI is a bit different because of their high R&D but the last 2 years may validate this 'transitioning into adulthood' effect. Anyway while consolidation in the chip industry has been discussed for the last 3 years (and longer likely), Barrons has an article about it and someone makes the crucial point there: the big boys want the IP esp. for the System on a Chip market. Barrons speculates that LSI Logic (alongwith a few others) is one that is of interest. LSI and VLSI are the only strong ones from the list I saw there. Also the article's author thinks that the consolidation could begin by the end of the year. I'll believe it when I see it - but they make a good point - if there is one there will be a maniacal surge of acquisitions... Besides they make the very good case that the fabless guys are ok (because they do not have to put up the big cap. exp). Anyway if there is any such consolidation I think we should get a good premium since we have a lot of very useful IP. Besides even if LSI is a bit big if someone else is taken over watch LSI's stock price surge because the market will build up a 'takeover premium' into the stock. ---- Also there is another article about Marty Whitman and his fondness of semi-equips. ---- And there is yet another about small caps selling around book value and of course many small semi-equips are covered in there. ---- It's been a long while that I can remember the semi or semi-equip 'sector' being discussed in any article in Barron's and this time there were three. The guy on Main Street should realize that the small caps are being thrashed (unfairly), the semi-equips are being thrashed (a bit too much esp. the smaller ones - the larger ones are still a bit expensive) and LSI Logic (and to a lesser extent VLSI) has a lot of useful IP that other companies could find useful if they are interested in buying their way into SOCs.... ----- Shane.

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