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Technology Stocks : Vitesse Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: Dr. Id who wrote (2685)	7/6/1999 11:25:00 PM
From: A. Edwards	Respond to of 4710

OSHA is pounding the table on semi's Q2: Merrill Lynch 6 July 1999 Joseph A. Osha, CFA Vice President Mark Lipacis Industry Analyst Semiconductors Earnings Preview – June Quarter Investment Highlights: · We expect the June quarter earnings season for the semiconductor industry to be upbeat. The turnaround in demand and pricing that began in the fall of 1998 continues, which should make it easier for the industry to hit our industry growth expectations of 15% for 1999. · The strong demand for communications equipment continues to be the most exciting growth driver for the semiconductor industry. We expect the communications-oriented companies under our coverage to see an average YoY revenue and EPS growth of 59% for the June quarter, well in excess of the overall industry. · Worries about the state of demand from the PC industry are overblown in our opinion. In fact, we believe that the continuing decline in ASPs for microprocessors will drive unit demand in 1999 that will be stronger than current expectations. · Companies for which we have either intermediate or long term buy recommendations include Broadcom (BRCM; C-1-1-9; $138.88), Conexant (CNXT; C-2-1-9;$57.50), Intel (INTC; B-1-1-7; $63.88), Linear Technology (LLTC; C-2-1-7; $68.75), PMC Sierra (PMCS; C-1-1-9; $66), Texas Instruments (TXN; B-2-1-7; $142), and Vitesse Semiconductor (VTSS; C-2-1-9; $71.50). Vitesse Semiconductor: We believe Vitesse continues to benefit from growth in sales of SONET IC's. We expect revenue growth of 60% to $74 million and EPS of $0.24. We are forecasting revenues from SONET IC's to increase by 80% to $38.5 million, while revenues from datacom products should increase by 60% to $21 million. As Vitesse continues to ramp up its new fab, we expect backlog to decline relative to sales. We would not interpret this as a negative sign. Vitesse's backlog had arguably grown so large in 1998 that is was causing customers to look elsewhere. Our earnings estimate for the September 1999 fiscal year stands at $0.90, up 34% YoY. Our intermediate-term investment rating remains at Accumulate and our long term rating a Buy.

To: Dr. Id who wrote (2685)	7/7/1999 8:58:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 4710

JDB, according to Yahoo! biz.yahoo.com VTSS has a PEG of 2.35 compared to the S&P500 which has a PEG of 3.60. But VTSS has a beta of 1.82 which makes the CNPEG2 equal to 1.19 -- slightly overpriced according to my criteria. I caution you that the raw numbers come from Yahoo!, and they may be incorrect. I believe that the long term growth rate is higher than Yahoo! indicates. The robust nature of the telecommunications market is a telling issue as far as I'm concerned, so VTSS's overpricing according to my mechanical criterion isn't so important. I am happy to hold VTSS for the long term at these levels. I haven't run a CNPEG2 screen on the stocks that I own lately, but one that seems to stand out is DELL, which has a PEG of around 1.69, so the CNPEG2 comes in at around 0.66. I tend to buy stocks when the CNPEG2 values so indicate, and sell only when the long-term fundamentals have changed substantially for the worse. Only when a stock becomes really overheated (as in the case of CSCO) do I sell. TTFN, CTC TTFN, CTC