VTSS: Raising Price Target from $40 to $100
Salomon Smith Barney
Tuesday, February 29, 2000

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--SUMMARY:--Vitesse Semiconductor--Semiconductors
--EARNINGS PER SHARE--------------------------------------------------------
               FYE    1 Qtr      2 Qtr      3 Qtr      4 Qtr      Year
Actual   09/99 EPS    $0.10A     $0.11A     $0.12A     $0.13A     $0.45A

Previous 09/00 EPS    $0.14A     $0.15E     $0.17E     $0.18E     $0.64E
Current  09/00 EPS    $0.14A     $0.15E     $0.17E     $0.18E     $0.64E

Previous 09/01 EPS    $0.19E     $0.20E     $0.22E     $0.23E     $0.84E
Current  09/01 EPS    $0.19E     $0.20E     $0.22E     $0.23E     $0.84E

Previous 09/02 EPS    $N/A       $N/A       $N/A       $N/A       $N/A
Current  09/02 EPS    $N/A       $N/A       $N/A       $N/A       $N/A

Footnotes:     

--FUNDAMENTALS--------------------------------------------------------------

Current Rank........:2H Prior:No Change Price (02/28/00)....:$91.63
P/E Ratio 09/00.....:143.2x             Target Price..:$100.00 Prior:40.00
P/E Ratio 09/01.....:109.1x             Proj.5yr EPS Grth...:40.0%
Return on Eqty 99...:N/A%               Book Value/Shr(00)..:3.12
LT Debt-to-Capital(a)0.5%               Dividend............:$N/A
Revenue (00)........:407.80mil          Yield...............:N/A%
Shares Outstanding..:169.8mil           Convertible.........:No
Mkt. Capitalization.:15558.8mil         Hedge Clause(s).....:
Comments............:(a) Data as of the most recently reported quarter.
Comments............:

--OPINION:------------------------------------------------------------------

We are raising the targets on seven of the stocks in our
coverage universe based on the strength of demand for 
communications components.  The stocks include AMCC, PMC-
Sierra, Altera, Xilinx, LSI Logic, Broadcom, and Vitesse 
Semiconductor.

While the Internet IC stocks have been extraordinarily 
strong over the last few months, we believe investors' 
appetite for the group will continue to overwhelm 
valuation concerns.  By any measure, few other areas 
possess the growth, upside potential, and profitability of 
the Internet IC area.  For example, we believe companies 
such as AMCC, Broadcom, and PMC-Sierra could potentially 
double sales this year and next, wreaking havoc with 
traditional valuation screens.  In general, we believe 
there remains very good upside potential to the current 
quarter and long-term EPS consensus estimates.

Recent watershed events reinforce the impression that we 
are still in the  early stages of the Internet 
infrastructure build-out, highlighting the sustainability 
of demand for Internet ICs.  For example, Level 3's multi-
billion deal suggests leading carriers may continue to have 
access to capital markets even in times of stock market 
stress.  In addition, Monday's announcement that auto 
manufacturers plan to push a quarter trillion dollars worth 
of transactions across the Web suggests even Old Economy 
companies are moving from "bricks" to "clicks."

On average, we have raised our price targets on the 
Internet IC companies five times over the last twelve 
months, and we would expect similar positive revisions this 
year.  In other words, we would not use the nearness of a 
price target as a reason to sell one of these stocks.  
Nevertheless, valuation remains the biggest risk for the 
group, and the stocks are vulnerable to any potential 
NASDAQ sell-off.

We are raising our Vitesse price target from $40 to 
$100.