CRUS: Can they restore investors' confidence? Message Board

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Technology Stocks : CRUS: Can they restore investors' confidence?

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To: Robert Talty who wrote (3)	1/25/1997 10:16:00 AM
From: jason	of 23

Robert: You provided some very informative insights into the business. I had had this question in my mind that how come CRUS couldn't achieve a better gross profit margin (~40%) given their heavy R&D investments (~24% of revenues). Afterall, S3 has been able to achieve the same gross profit margin with a much lower R&D (~15%). Now, you have at least provided part of the answer: the bad agreement they entered into with IBM to run the wafer join venture. Now that they've launched a new join venture with Lucent to complement the IBM venture, can we assume that the product costs will be substantially reduced when the new wafer plant goes into productions? If so, do you have an estimate on how much the gross margin will be improve? Also, any idea when the plant will be into productions? Maybe johnd can provide some answer on this. In any case, either CRUS will have to cut their R&D spending or raising their gross margin. There is no excuse for them to keep running a high R&D rate while producing a mediocre gross margin. Any comments? Bluesky Qin

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