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Technology Stocks : Vitesse Semiconductor

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To: Robert Schwartz who wrote (312)	11/27/1996 2:35:00 PM
From: Robert Talty	of 4710

Robert, VTSS is over priced because of its 14:1 price to sales. Most of the IC manufactures are at price to sales ratios between 2 and 4. I expect VTSS to have a P/S of 2 to 4 with 4 years. Based on this they need revenue per quarter of between $62M and $124M to support todays market cap ( $950M ). Even assuming they maintain the record sales growth they achieved in 95-96 (60%) it will still take VTSS 3 to 4 years to reach sales of $62M to $128M. All this assumes that the niche segment that they service grows at this rate and that they do not run into any production capacity bottlenecks or any competition. Basically as I see it if nothing goes wrong for the next 3 years then VTSS could still be worth $46 in 3 years time but with all the things that could go wrong I think your local casino is a better long term bet. regards Robert Talty

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