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Technology Stocks : CRUS: Can they restore investors' confidence?
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To: jason who wrote ()1/23/1997 8:48:00 PM
From: Robert Talty   of 23
 
Jason, Good analysis, however it will be hard to improve margins and reduce R&D over the long term.

As I see it the function of a design section is to deliver new products which improve margins and/or secure a strategic business. Now it might be true that CRUS is not getting value for money from its design sections but I don't understand how margins will suddenly increase without new products.

A good mixed signal product has a life of about 5 years however you really need to model R&D expense based on a 3 year recovery because of the uncertainity. It takes between 6 months and 1 year to design and qual. Revenue is maximized in the 2nd and 3rd years after design start so looking back only 2 years really does not give us the full picture of how effecient or otherwise the R&D section is. What you really need to look at is new product revenue, and their growth rates. This is a better measure of an R&D section.

As for product margins I expect them to improve, as I see it margins were hit by the high cost of wafers from the IBM joint venture, they made these agreements when the industry was running hot and paid a high price for this this capacity. I expect them to bring production costs down given a little time.

anyway got to go.

Robert Talty

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