M: R&D will hurt this quarter's earnings. One of the impressive issues pertaining to R&D is that if LSI had kept R&D even with its revenue for the past three years, it would be reporting about $1.75 in earnings for this year. Instead, LSI invested strongly in its future, and it will be extremely well positioned for the next cycle up in semis. How long will it last? I don't know, but when it starts, LSI will be a superior investment for a long-term investor such as myself, and it will be a great trading vehicle for my friend K.
Bonuses will also hurt this quarter, since they are are paid out this quarter. Moreover, next quarter will take a hit because of Gresham and Symbios--although 1.2 times sales beats the price of every single semi stock that is listed under the SI semi category--by a long shot with the exception of VLSI which is trading 1.6 times sales.
The one thing I know about semis is that the market will not wait for absolute hard evidence in terms of announced earnings to move this stock either way. Best example of that was February 1996, when LSI announced record earnings for the quarter and the year. The stock that day had climatic selling resulting in a price of 22. Four months prior to that, it was priced in the mid sixties. At its current price, it's an exquisitely easy bet to make 30% over the next year. Bettors call it a "Mooch lay me down" or a "Mortal Lock". Why try to time your move into this stock, when a major move to the upside can be made in a two week period? |
