Jay, I don't pretend to know about the quality of VLSI's management against absolute standards nor am I prepared to defend their execution relative to an amorphous claim of better management in other unnamed companies. In that specific regard I can claim relatively complete ignorance (I've left you an opening here).
Like you, I was trapped with a long position that eroded. Unlike you, my position was in the low 30s. On the other hand, I began adding to my position when VLSI hit 9 on the way back up. Why I've done that has nothing to do with the management team because all things considered, management quality is one but not the only consideration an investor might take into account.
(In a prior post, I said that I don't consider VLSI a holding for retirement. VLSI is in many regards a single product company in a sector that changes with the speed of light. ("Only the Paranoid Survive", right?)
The positions I've taken is based on the following factors:
1. VLSI and LSI have roughly tracked each other over the last year +. This tells me that VLSI's woes aren't entirely due to company ineptitude or company specific problems. A change in sentiment would result in a higher than usual recovery with no change in any other factor.
2. VLSI was punished much more than its peers in the subsector (ASIC and DSP chips) VLSI was at one point selling for @50% of its asset value. A position at that point had little risk.
3. The entire semi sector was punished last year. VLSI was no exception, but VLSI's fall was extreme. Because of that, the potential for recovery is also extreme - all other things being equal.
4. Perceived exposure to woes in the far east were overblown as regards the subsector. On the other hand, in most of the world cellular phones are continuing to sell like hotcakes. In much of the developing world, the cost of a cellular phone system is less than the cost of land line infrastructure. Who wins there?
Here are the factors to consider in my opinion:
1. Do they have a quality product - in their niche - that people want to buy? The answer is in my opinion, 'yes'.
2. How loyal are their customers? Answer: within the bounds of good business sense, my feeling is that a certain loyalty exists.
3. Are macro-level conditions such that a recovery is likely? My sense: Yes.
4. Is VLSI and are VLSI's customers gaining business? Answer: yes.
So, with all due respect to those who think that management issues exist, the issue at hand is whether or not a position in the company will yield a return.... and if you believe it can, then how you feel about 'management' ought not to be the deciding factor. |
