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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: unclewest who wrote (14677)	1/9/2000 6:36:00 AM
From: unclewest	Read Replies (3) \| Respond to of 54805

OK...enough on CREE for me for now. I do enjoy this level of debate and hope we don't drop it entirely. I was catching up on some NYStew posts about GMST. Was shocked to learn that GMST has only 215 employees. In all of my GMST readings, I had never seen a headcount before. (or I forgot, or it didn't register, or I forgot) Talk about margins! FWIW after this dip, i am now 35% CREE and 35% GMST. I am convinced that by the end of the year the market will prove that I am not early.

To: unclewest who wrote (14677)	1/9/2000 12:54:00 PM
From: LindyBill	Read Replies (1) \| Respond to of 54805

"cree" is a small company that makes chips out of silicon carbide. Mike, that is from the header of the thread. My very limited understanding of this company is that if refines the SCi before making a chip out of it, while Intel gets the material already refined. The big deal is that they know how to refine the material better than anyone else. Once the material is refined,others could imbed it. (I think). UncleWest will correct me, I am sure, for any errors above. description of CREE fits QCOM like a glove, a year ago. UncleWest, a year ago, Q was a 10 Billion dollar company, not a 2 Billion Dollar one like CREE is now. And yes, size does make a difference! A year ago competitors could manufacture CDMA systems, and patent lawsuits were going on. CREE seems to have no one in a position to challenge them yet, but they are still small fry by our terms. They need a 500% increase in market size to get to where Qualcomm was a year ago. I don't have a handle on the potential market size for CREE, but I am guessing that it will be nowhere near as big as Q's I am not impressed by patents issued on processing a raw material like SCi when no one is after their market yet. Qualcomm's patents and products are infinitely more complicated than CREE's.

To: unclewest who wrote (14677)	1/9/2000 2:52:00 PM
From: Robert Jacobs	Respond to of 54805

Uncle: LindyBill is not totally wrong comparing cree to a fab house. I would offer, however, that the best comparison is to intel in the 70's with these exceptions: Cree makes optoelectric devices while intel made semiconductor devices. Markets for each of the products was similar then as it is now. Cree dominates the SiC optoelectric device market in high-brite LED's, microwave transmission chips (new) and power conversion chips (new) and high freq. laser chip diodes (new). a big difference is also that while intel made their own Si wafers, they did not have patents on the process nor significant technological barriers to entry to produce the substrates...cree has the IP protection on the process and technology...and is 5 years ahead of the nearest competitor in SiC. Commercially viable SiC chips are the opposite of semiconductor chips in that semi chips are a commodity while cree's SiC chips are the only game in town and likely to stay that way until SiC is replaced by another material (probably AiN but cree has patents on that too)...or another mfgr can figure out a way to create SiC substrates that have structures that support conductivity with sufficient purity to be useful (unlikely as all other wafers seen at the SiC conf were 2" or less...like cree's in the early 90's...and were filled with microcracks and micropipes making them ok for research but not for commercial use. So bottom line is cree can maintain ASPs and margins as they ramp a business with multiple product lines where revenues are limited only by their production capacity...and with little on the horizon to distract them from their biz plan. With gross margins of over 50% and going to 85% (the ceo's theoretical limit on SiC yields) and net margins going to 35% in a biz that will likely produce 2b in revenues in 5 years we have the potential of $20/share in 5 years x 70 multiple = $1,400/share or a $45b market cap...reasonable for a company that has the potential to sell a $.35c chipx4 in every cell phone in the world, 50 in every traffic light, a million in every outdoor high brite display, 4 in every light bulb that SiC can replace, every ennunciator light in electric equip...every MESFET microwaver transistor, every micro power conversion chip, every high bandwidth optical laser...on and on!