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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Uncle Frank who wrote ()	3/5/1999 1:36:00 PM
From: KY	Read Replies (1) of 54805

Just grabbed this from the allknowing "Bulldozer" on the PMC Sierra thread. Interesting insight on INTC, LEVL, and PMCS. After reading this I wonder if PMCS is an emerging gorilla candidate? Comments welcome. "Allright - now that the market has shown me its not as dumb as I think (PMC up $4.00)- a (very) brief lesson on why PMC is NOT affected by LEVL/INTC: Three words - Edge vs. Core. LEVL and INTC play in the edge - NICS, Ethernet and FE switches and components, hubs etc. This is a relatively mature segment with many standards and lots of competition. PMCS/VTSS/AMCC etc. play in the core/WAN. This is still a very early stage merchant mkt (mostly ASICs currently) and the telecom/datacom expertise and relationships needed here produce high barriers to entry. Margins are higher (reflective of this) - look at PMC gross argins of 75% vs INTC of 50%. Design cycles in this segments sometimes last years and years - PMC still sells chips it produced 5-7 years ago! You'll NEVER see that in the LAN/edge. The two are as different as night and day. As an exec at BRCM stated today (not surprisingly - but I think accurately) "I think it takes more than a balance sheet to unseat the relationships established in our markets" - While true for BRCM - its doubly true for the Core/WAN players." Bulldozer

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