Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Michael Grosz who wrote (8182)	12/7/1997 11:13:00 AM
From: shane forbes	Read Replies (1) \| Respond to of 25814

Hello Michael. For s/t bounces you need to ask the TA experts - dlo (aka TSO) or E.Graphs (aka E.Midas & Sally) or DavidG. I'll tell you what I think about the 2 companies: First in terms of size, sales/share, book value/share etc these 2 are very similar companies with ATML slightly smaller. ATML pulled off one of the greatest things I've seen in a long time re: revenue growth. 200% revenue growth over 2 years for a company which in 1994 had around 350 mil. in revenues and now is at around 1 billion or so. They breezed through the 1996 corrective period in semi-demand. But demand did catch up in 1997 didn't it. And unfortunately the drop in the price the last few weeks is not bogus - the flash and logic segments that they deal in are seeing lead times go down dramatically. Flash is also doing the the DRAM thing - getting prices crushed: techweb.com However I do not know what the % of revenue flash is for ATML. EPROMs and EEPROMs - ATML has gained tremendous market share behind AMD and INTC (I think ). But the market is stagnant and I don't see much more growth there. But they are entering other fields and have spent mightily on PP&E the last 2 years. Deal with IOM on Clik!, digital cameras, FPGAs etc - all high growth areas. Plus they are known for a superb technically oriented management. And they therefore ought to rebound i/t to l/t. However s/t the pricing pressure shows no sign of abating (note INTC delayed new plant for flash - like DRAM bit growth is strong but pricing is ferocious). And since the company I think still derives a large percentage of their revenue from commodity parts they will be under pressure on the top line. BUT the question is all of this in their stock price at present? I'm tempted to say yes - all the bad news is in. In the past if you bought ATML in the low 20's and held on for 6 months or less the stock would yo-yo back to the low to mid 30's. So in spite of the problems maybe a small bet at this point would not be a bad idea. But keep money in hand because the pricing pressures may continue for quite some time. And since they just made all those cap. expenditures, earnings will take a hit with the high depreciation. Re: our fav LSI - tricky babe. This was supposed to be the up-cycle for LSI. But things so far have not turned out their way. Just saw that SUN is indicating good things in high end computing. So maybe the high end computing segment that dragged last quarter's growth down has lessened. But my feeling is that these things take time because of the time it takes to move to ramp up production again. With LSI I'm constantly bothered by the fact that bad news always seems to be around the corner. BUT Sony is doing very well - yet can you imagine where LSI would be without the PlayStation's success. LSI has higher margin products than commodity companies on a per product basis because of the value added stuff that LSI adds on. However because their factory utilization is poorer they tend to show GPRs lower than some commodity companies. And similarly because of their poor factory utilization their overall GPRs are lower than the other non-commodity companies which are spreading their fixed costs out. Will this improve next q. I would say 70/30 in favor. How much? Not that much I think. Business might pick up Q2. Next important question is when the stock price will reflect the pick up in business. NOT A CLUE! Another point in your favor is the fact that the company is buying back shares. The real turn will come when the company reprices options! Sorry I could not be of much more help re: s/t price moves. I don't attempt to try to play this game any more. That said the current prices seem to indicate a worse situation than 1996. And in spite of the problems with DRAM, I find that a bit hard to swallow. BTW these are 2 of the trickier companies you have picked. For a better l/t play try ADI. Or wait until that company's prices get rocked and load up. All these 3 are 1 billion dollar companies trying to get to the next stage. ADI seems the best bet to me. They run the ship the way I like to see - high growth steady segment providing cash that can be used to go after other segements - the barbell approach (a good way to run a portfolio BTW). What did Buffet say - I'm happier with the assurance of a good return than the possibility of a great return (very badly paraphrased).