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Strategies & Market Trends : Range Bound & Undervalued Quality Stocks -- Ignore unavailable to you. Want to Upgrade?

To: JakeStraw who wrote (436)	1/11/2000 12:57:00 PM
From: Neil H	Read Replies (2) \| Respond to of 5499

ELON - Its product has been made the standard for networking home appliances etc. ANSI standard - Supported by CSCO and other big boys. Great future Also from Fool Plate Special Jan 11, 2000 FOOL PLATE SPECIAL An Investment Opinion Vitesse Continues Along the Fast Growth Track By Brian Graney January 11, 2000 High-speed communications chip maker Vitesse Semiconductor Corp. (Nasdaq:VTSS - news) turned in its fiscal Q1 results last night, posting earnings per share of $0.14. The performance matched the First Call mean estimate but failed to light a fire under investors, who dropped Vitesse's stock for a roughly 7% loss this morning. As the French translation of its corporate name suggests, speed is everything in Vitesse's business. This maxim relates not only to the actual design specs of the Sonet, ATM, IP, Fibre Channel, and gigabit ethernet integrated circuits the firm makes for the likes of Alcatel (NYSE:ALA - news) , Cisco Systems (Nasdaq:CSCO - news) , Ericsson (Nasdaq:ERICY - news) , and others, but to more general areas of the business as well. Vitesse is on a competition treadmill to beat its rivals to the punch with new products, meaning it is in a never-ending race to develop new "design wins" and get them out the fab door -- fast. Judging from the company's comments for the just-completed quarter, Vitesse is doing a pretty good job in this area. "Our solution selling is being validated in the market with the greatest design win quarter in our history,' said President and CEO Lou Tomasetta. Meanwhile, the business' major financial moving parts continued to sprint forward. Net earnings climbed 55% year-on-year and 8% sequentially, while revenues increased 47% from a year ago and 11% sequentially. Longtime observers have become accustomed to these kinds of growth rates from Vitesse, which has averaged double-digit sequential revenue gains for practically every quarter in the past four years. With demand for the company's broadband-centric products expected to grow strongly for some time to come, the major risk for investors at this point boils down simply to execution by the company. But at some point down the road, today's stable business environment is guaranteed to change. Again and again, business history has shown that unregulated industries generally grow and develop in three phases. The initial phase is marked by fast growth, where many competitors enter into a new market and a high-demand sea lifts all boats. This is where the communications chip market finds itself right now and where it has been for the past few years, producing a number of big share-price appreciation winners along the way. At some point, though, the competitive waters will become more choppy, shaking out some players as rivals start competing with each other at the margin. During this second phase, the growth rates will come down and some firms will start missing their earnings expectations. Eventually, a few big companies with staying power will emerge and start to dominate the business. With any luck, these surviving firms will start growing profitably again, beginning the third phase of the general business lifecycle. From soft drinks to automobiles to home video game platforms, this three-phase pattern has shown up again and again. For the long-term investor looking at Vitesse and the present-day communications chip industry, the essential question that needs to be answered is how long today's initial growth phase will last and when the second shakeout period will begin in earnest. Based on the fact that broadband technologies themselves are still emerging, we may not see Phase 2 for this industry for a few more years. That situation opens up opportunities for investors to continue to profit from the industry's high-growth stage -- so long as it is understood that today's growth rates will not and cannot last forever.