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Technology Stocks : LSI Corporation
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To: thomas hayden who wrote (14587)8/27/1998 12:13:00 AM
From: DanZ  Read Replies (3) of 25814
 
Tom,

<If they were losing money I think the stock would trade down to book value. As long as they are making money there will be a small premium.>

I said the same thing about IRF and VLSI. IRF has a book value of 7.75 and it closed at 5 5/8 today. The stock has been trading below book value for almost 2 months. VLSI has a book value of 12 and it closed at 11 1/8 today with a low of 10 7/8. Both of these companies are making money, albeit not as much as in previous quarters. The book value of a semiconductor company can be deceiving because the value of a fab depreciates faster than they show on the books. Also, the value of inventory might be inflated. However land can be worth much more than they show on the books. You have to look very closely at the balance sheet before you can figure out what the "true" book value is. NSM is also trading below book but they are losing money.

Investors don't seem to care about book value when they push the sell button. The main problem that I see with semiconductor stocks right now is that there aren't enough bidders and if a seller wants out, they have to move the price down. There doesn't seem to be a big conviction to sell, as can be seen by the low volume, but people sell when they see their stock going down and there just aren't enough bids to support them. We need a change in sentiment to get these stocks moving up again but I think the SOX will have to test 226 and bounce before we will see many bids on these stocks.

Dan
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