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Technology Stocks : LSI Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Alan C. Zezula who wrote (20380)	10/22/1999 12:07:00 PM
From: Glen2	Respond to of 25814

Dan Niles of BBRS today issued a report. Key points follow: 1. LSI reported revenues of $540M, (up 8% q/q and 38% y/y) and EBG of $0.35 versus our $0.29 forecast. All vertical markets and geographies were strong. Europe, which usually sees a seasonal slowdown in Q3, posted strong revenues driven by telecom. Consumer ws especially strong as the company experienced DVD, DCAM, and set-top box component pre-orders for the holiday season. 2. Gross margin expanded q/q to 39.7% from 37.2% heading to 45% by late 2000. Operating margins expanded from 9.7% in Q2 to 14% in Q3 (versus our 12.6% estimate) due to gross margins that were 116 bps better than expected and operating expenses that were 20 bps lower than expected. Operating margins should reach 20% by late FY00. The company is open to another 500 bps increase in both gross margins and operating margins but the current model is 45% and 20%. 3. Demand was broad based and was especially strong in networking and telecom. We believe that demand will be strong in Q4 given a positive book-to-bill in Q3 and a bigger backlog. The company currently expects revenue growth in the same 6-8% for Q4 as was the guidance in Q3. They also believe semiconductor industry growth will be higher about 20-25% with their growth being higher. 4. We are increasing our EPS for 1999 from $1.04 to $1.06 and 2000 from $2.15 to $2.17. This is versus First Call consensus o $1.00 and $2.08. As we've said before, consumer could provide the real upside next year driven by DVD, DCAM, and set-top boxes. We maintain our price target of $65.