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

To: David Perfette who wrote (20768)	12/7/1999 12:33:00 PM
From: Glen2	Read Replies (1) \| Respond to of 25814

The latest Morgan Stanley Dean Witter report on LSI that I could find is dated November 12. Valuation: We rate LSI Strong Buy. Our target price of $100 per share assumes the stock can trade at a premium to the S&P Industrials' multiple. We expect LSI's multiple to expand as investors become more comfortable with the company's end market exposure and strong earnings momentum story. In our view, LSI is suitable for investors with a tolerance for the price volatility associated with technology stocks. Key points include: 1. LSI's intellectual property is a strategic advantage. ICs are incorporating greater functionality onto a single chip, creating large chips that strain the engineering resources required to develop such a device. LSI's CoreWare library of standard cells - which include sub-system level functions for the consumer, communication, and computer markets - greatly enhances the product's time-to-market, while maintaining the cost effectiveness of standard cells. 2. Positioned to take advantage of the growth opportunities offered by the Internet. LSI's top-tier customer base is focused on adding value to networking, broadband communications, computer, and digital consumer products. They use LSI's ASICs and ASSPs to provide the necessary product performance and differentiation. In support of the Internet, LSI's ASICs and ASSPs are used in settop boxes, routers, switches, DSL equipment, storage systems, high-speed input/output devices, servers, and many other types of networking hardware. 3. Strong new product momentum in communication, consumer, computer, and storage businesses. In addition to its ASIC focus, LSI has recently reestablished its commitment to the ASSP market. These single-chip solutions are targeted toward high-growth markets, which include DVD decoders, digital camera controllers, MPEG2 audio/video decoders, high-end storage, satellite receivers, DCMA baseband ICs, and fibre channel ICs. In our view, networking ICs remain one of the company's strongest product areas. We believe many of LSI's ASSPs set price/performance standards for the industry, and may also be available as cores for higher-level integration by LSI's ASIC customers. 4. Restructuring should expand earnings power in 1999. LSI announced the company will close an 11-year-old wafer fab in Japan, as well as the assembly and test facilities of Symbios, (which LSI acquired in August 1998) while simultaneously ramping its state-of-the-art wafer fab in Gresham, Oregon. In addition, LSI plans to consolidate its design centers, sales offices, and administrative functions with those of Symbios. The restructuring includes the elimination of 1200 jobs, or 17% of LSI's workforce. 5. New product cycles are likely to be stronger. The average estimated lifetime revenue for LSI's design wins has more than doubled in the last year, and we believe this bodes well for the company's new product cycles. During the industry's cyclical downturn, we believe LSI accepted some lower-volume "fab-filler" business to help absorbed fixed costs. We believe these products caused manufacturing inefficiencies and carried lower margins. With fewer products providing larger revenue potential, we believe the company will be in an excellent position to enhance margins.