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Technology Stocks : VLSI Technology - Waiting for good news from NASDAQ !!!
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To: Gary Burton who wrote (4335)9/3/1998 11:10:00 PM
From: kash johal   of 6565
 
Gary,

Excellent points concerning cash vs ltd.

I bought in today at 7 5/8 for a quick trade.

I expect it will gap up in a rally at least 1-2 points.

Long term I think that LSI and VLSI are essentialy dead.

The mainstream high volume ASIC business is moving towards a foundry model. This has largely been the bread and butter business for folks like LSI/VLSI.

Up till a few years ago LSI'/VLSIs leverage was superior wafer processing, superior proprietary CAD (remember what became of Compass).

Folks like UMC,Chartered and TSMC now have superior wafer manufacturing/process capabilities (for example TSMC is sampling 0.18 micron and will have Cu in 99) and most people are using same standardized design tools from folks like Synopsys, CAdence,Avanti etc.

So LSI,VLSI's leverage is now really in IP and in certain focussed niche markets. Such as Camera chips, DVD, Wireless.
However over the next 2-3 years IP is undergoing a revolution and major companies will be able to purchase it and buy direct from foundries.

So many medium sized companies who are less than 2-3 Bn in sales cannot realistically afford to be the in-house foundry business, as next generation 0.1 micron fabs will require $1-2Bn in capital.

So medium sized folks like IDTI,CY,VLSI (LSI to a lesser extent) which may be excellent companies will become under intense pressure and will have to consolidate.

There has been a lot of talk of the $12/share in book value. The problem is that most of this is a fast depreciating asset called wafer fab. And there is nothing like the millstone of an under utilized previous generation wafer fab to drag a good company down.

regards,

kash
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