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Technology Stocks : Spectrum Signal Processing (SSPI) -- Ignore unavailable to you. Want to Upgrade?

To: lazar921 who wrote (262)	11/27/1997 12:02:00 PM
From: lazar921	Read Replies (1) \| Respond to of 4400

INDUSTRY CONSOLIDATION I'm sure you've all seen by now the announcement which was released on Thursday regarding MIZR and LSI's merger agreement. A simply addition process of combined reveunes immediatley leads one to believe that this merger now places Spectrum in the number 2 spot, and that this combined company is now in a much stronger position within the industry. Sometimes first glances can be deceptive. The release stated that for the period ending 9-30-97, LSI's revenues were $22m which was down 8.3% from the year ago period. In that same time period, Spectrum's revenues were $38.4M(C) which was up 65% from the same period a year ago. So who's losing market share here? In January of this year, LSI and Spectrum extended their distribution agreement. Under the terms of that agreement Spectrum was required to purchase a certain number of boards from LSI. Also, in Spectrum's release from January regarding this agreement, it also stated that 25% of Q496 revenues came from LSI products. It would appear to me that a significant portion of LSI's revenues in their last fiscal year came from Spectrum. So what is to happen to LSI revenues if Spectrum announces that their LSI replacement program is successful. With revenues down from the prior year, and a major expansion into the US and Europe this past year, how profitable can LSI be? Currently Spectrum has successfully out competed both MIZR and LSI, and until very recently, LSI was a larger company than Spectrum. Perhaps this is merely an admission that LSI's highly touted U.S. expansion plans failed and they were desperate to do something in Spectrum's market. We've all read the EE Times article speculating that it would be SSPIF and LSI who would be getting together. Seems to be that Mizr had the luxury of an over valued stock price as currency in this transaction, and the dilution that will occur as a result is not worth if for what they are getting in LSI. If their was any truth to the EE Times article, personally I'm glad we didn't take on that amount of dilution for LSI when it appears we can compete just fine without them. The fact that MIZR has retained Cowen & Company to handle this transaction now means there will be another firm out there following this industry. Surely industry comparisons will be made, and Spectrum can't go un-noticed for much longer.