Jock, thanks for giving us the conference call details, really helps. I don't judge Wilf too much on the past. I try to judge what he says to my view of the future. My view of things:
1. Wilf and gang are actively managing the company. They could have sat on the thing, as in not shutting anything down and try to 'upgrade' Colorodo to 0.25um and keep making their $0.15/Q, but they did not. They actively positioned the company for the future at the expanse of having to take a hit now with the shutdowns.
2. It did not take them long to combine Symbios at all. Great job.
Also, it did not appear that they went in there like conquerers, which is the usual way people do take overs. And the usual results are they kill the goose. Like their style. As a side note, see how Cyrix went into complete product dis-array the last 9 months after NSM took them over.
3. I like Wilf's thinking on the Far East situation and especially consumer electronics. My thinking on that is along his lines -
a. Jap. starting taking stuff inhouse, no surprise. Everybody understands they cannot depend on DRAMs anymore but need to go Intel-like with added value. Look for guys like Toshiba, NEC, Fujitsu and gang to not farm out IP stuff to LSI. So out goes the high end stuff. Wilf is realistic about this.
b. BUT, for consumer guys like Sony, Panasonic, Casio, Minolta and the like, I look for them to abandon semis. With no DRAMs, they just can't afford to build multi-$B fabs and keep them stuffed in-house. Not to mention they need IP for products and just won't have time to develop their own IP with shorter and shorter product cycles. These companies will stop go vertical and go Dell, Gateway, MUEI and become really marketeers. The good thing for LSI is a lot of the stuff that they need to outsource, instead of PC type gelly-beans that Taiwan Inc. can do, need a lot of IP, e.g. digicam. LSI can do VERY well if that is the model going forward. Being tapped into the customer now on camera allows them to keep working on newer stuff. LSI seems to want to stake out the high-end consumer of the future. I like that.
c. Wilf seems to know that consumer can be really big in China and Far East and am positioning the company for it. Thus I am sure that he knows he needs top grade manufacturing for that to compete against TSMC and UMC. The good part about Far East - things turn on a dime. e.g. HK real estate and stock market down 50% past 9 months. It can just go right back up in the next 9 months. Same for consumer spending.
4. I do not see same bleak economic scenario that you see. AND THIS IS OUR BIGGEST DIFFERENCE IN OPINION. I do not see US slowing down that much. Thanks to the Feds I see consumer and housing starts coming back. I see Far East coming back fast, especially now that Japan seems to be finally getting their house in order. And Japan consumer spending can come back real fast too e.g. PC sales in Japan since Win98 introduction ahd exceeded all expectations and have not slowed even by end of Sept. With Japan coming to the tables for the next round, THAT will be explosive!
5. With overall economic not declining that much or even coming back, I see the newer generation stuff ramping much faster than people anticipates. Take digital camera. So far all that stuff out there IMO have really been toys for technies. This morning I saw advertisement for the new Sonys. Everything get recorded directly on floopies (and not some x MB Flash Card that nobody understands) that can plug right into your PC. Personally, I have resisted this contraption myself because I scared about 'downloading' etc. I expect the consumer stuff like cameras and DVDs to take off from here a lot faster than people anticipates. All that stuff is now done on 0.35um I persume. But to get to mass market, that needs to be driven down to 0.25um and below.
6. Need to start Gresham now - takes time to debug and make it yield. As an example, note the Yahoo chat room post I put up a few posts back. But putting in new equipment and ramping capacity will be much quicker and cheaper than you project - Gresham WILL be the 'existing fab'.
7. Yes, Symbios margins are not as robust as one would hope. But I would not have expected Hyundai to have run a tight ship the American way. But I do expect Wilf and crew to get things in line. Again, I would not have expected Wilf to talk openly and directly about Symbios in this way. Come to think of it, I think Shane reported that Symbios seems to have high inventory. Perhaps they build product that turned into inventory right before the slowdown last Q. But that stuff should be sellable and not decline 60%/yr like RAMs. So we'll probably get that money back. And Xenon is finally moving, that should help.
7. Did not like them dragging Jap plant closing till end of Q1 '99. Would rather see them do it all this Q. But such is the fact of life.
8. Correct me somebody, but the STB business has always been in flux, especially for component suppliers - the box-makers essentially do not have fixed business plans even now. Interactively TV? DVD too? Cable modem or xDSL or simple cable? x86 or RISC? WinCE or proprietory? MPEG with or without? At least until the 'standards' are set, I think the supplier situation will be in flux. Tough to lose it, but in the next round, everybody's on same starting point again.
9. As for R&D, I expect them as hands on managers to understand what is best for the company. (Also as stockholders too, as Wilf bought 100k shares at $25?)
10. Surprised that Sony is back up to 10%. Is that Playstation II or is that digicam?
11. I like the new wireless stuff that apparantly came with Symbios. That's one area that I always wished LSI would get into. But that slowdown in telecom espcially wireless, hit Symbios much harder than LSI - much smaller base with Symbios. Is that one reason for Symbios non-producing in Q3?
12. They are targeting business model for flat sales. So any upside would surprise bottom line. I agree with Wilf, either below 10% or above 20%. Personally I suspect 20%. But even with 10% in '99, '00 will definitely be 20% in my opinion. And LSI is well positioned.
11. I am not too concerned about the next 6 months, but that is personally call. IMO, the thing to watch now is a. things in Far East, especially Japan and b. the Yahoo LSI chat regarding the postings by that guy who works at Gresham to see how the yield ramp is coming c. general US economy especially housing starts and soncumer spendings.
12. Finally, the new company structure will allow not just the company, but also the analysts to judge better how the company is doing. That is essential.
patrick |
