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Technology Stocks : LSI Corporation

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To: patrick tang who wrote (18343)	5/4/1999 8:09:00 AM
From: Robert Scott	Read Replies (2) of 25814

Here's the way it has worked in the past: Every 6 years or so (3 years up, 3 years down), chip companies go through a cycle of over investment then shutdowns. They simply cannot seem to adjust properly to the supply/demand cycle. So they overbuild during times of plenty = 1994 and 1995; then when the inevitable slowdown comes, they have too much capacity, pricing plummets and so plants are closed/not opened, layoffs, etc. Then (usually about 3 years from peak), demand gets in synch with lowered supply, pricing firms, and we begin the next up cycle. We are at the beginning of the next 3 year up cycle. What you have to realize is that the best positioned chip firms have slimmed down so that gross margins expand significantly and much of the additional revenue flows to the bottom line. This is why they tend to appreciate 5-10X during the 3 year up cycle. This will happen this time IMHO especially because the world is recovering. If the normal pattern holds, the chips will begin to be noticed next year - they will quietly go up for now - and in 2001 people will be saying its different this time for the chips as they are the stars in the market and they soar in value = TIME TO PUT IN STOP LOSSES TO SELL.

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