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

To: sea_biscuit who wrote (23244)	11/22/2000 12:07:33 AM
From: Jock Hutchinson	Read Replies (4) \| Respond to of 25814

Dipy: Here is my take. LSI is at an unprecedented price in the overall semi cycle in the sense that it is selling at such a low price, it doesn't make a difference whether the cycle is ending now or in a year from now. Consider the following: 1. Within 18 months LSI will have about $3 Billion in cash. That's about $10 a share. That means that LSI is currently selling at Book Value 18 months from now. 2. This time the semi cycle will be less of a cycle than previous cycles and will be more specific to the areas in which LSI competes. And primary among these is Communication, which will continue to grow despite any overall slowdown in the overall cycle. This means that at least 60 percent of LSI's business will continue to grow at rates of at least 25 to 30 percent year over year for the foreseeable future. As far as the lesser lights (storage etc.) LSI is still well positioned regardless of which direction the high end storage market heads. 3. LSI IP (Intelectual Property) is stronger than ever. 4. However, there are some serious concerns that I have. These include the lack of any CDMA announcements, and as DWB has made clear, there is the very real possibility that LSI's CDMA wins will become illusory, since upcoming CDMA technology will surpass that which LSI can offer. Moreover, the further LSI goes into the communications market, the more the likelihood that as the market grows, Mr. Intel will offer its version of highly commoditized chips that will eviscerate any advantage LSI has. Indeed, Intel's Andy Grove made it clear a number of years ago that he didn't have a lot of respect for the ASIC model. Nevertheless we shall see within the next two years just how the great FPGA debate turns out, and it says here that LSI will prevail on this matter over the ALTRs of the world. What do I see over the next two years. LSI being traded in a relatively narrow range of 20 to 55 depending on where we are at in the cycle. The irony will be that the closer the semi market is perceived as being near the end of the cycle, the better off LSI will be in the near term. The irony of this is that the actual end of the cycle may be short and not deep for companies like LSI, in which case that price of 80 may become a very real figure within the next 18 months. In short, I want my money back as soon as possible. I don't like holding losers for 18 months, but overall I am confident that LSI will see the 40s and probably 50s again within the next 18 months. Indeed, it is very possible that Mr. LSI will see 40 within the next 4 months. Thus, I believe that you have made a tremendous investment that has little long-term downside risk and upside potential of being a three bagger in the next two years.