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Technology Stocks : Rockwell-Spins off Conexant (CNXT) -- Ignore unavailable to you. Want to Upgrade?

To: Anthony who wrote (1677)	10/6/2000 6:18:55 PM
From: The Ox	Read Replies (1) \| Respond to of 2013

Hi Anthony. You have asked THE question, IMO. what do you think is a reasonable PE for this company When the stock was trading at $130, the stock was priced like a communications semi company in the group of TXCC, AMCC, PMCS, BRCM, VTSS and others. This has been the hottest sector in the semi business lately (I know that some might say opticals are hotter but I would say that the point could be debated). Currently, the stock is being priced like a diversified semi company, put in the group with ADI, TXN and similar cos. These companies have a price to sales ratio about 1/10th (or less) that of the above group. When we compare expected growth rates, the above group are all at or above 40% expected eps growth over the next year while the diversifieds have expectations in the 20-25% range. Seeing the disparity, CNXT has decided to spin off their faster growing, 'higher value' segment thinking this will create greater shareholder returns by linking the spin off with PMCS/VTSS/AMCC type of company. I believe this is a sound strategy. The 'other' segment of the business is in a lower margin, higher volume industry where growth is steady but significantly slower and where competition is great enough to keep margins and pricing power lower in direct comparison to the spin off segment. So, what is a reasonable PE for this company? Do you believe the company should be lumped into the ADI, TXN group or the BRCM, TXCC group? I think this question has had the market confused and with the bulk of the negative sentiment focused on the semi industry of late, it's no wonder that CNXT has had it's struggles. Just my opinion. I'd like to read what other people have to say about my point of view. Michael