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

To: Tony Viola who wrote (9630)	2/10/1998 1:37:00 AM
From: shane forbes	Respond to of 25814

Tony: This has been the most compelling reason I think that LSI has NOT been racing ahead in the std. cell area. My sense is that these designs are just plain difficult. So to lower LSI's risk (and for it to make economic sense) LSI tries to target the top tier customers and go after very high volume potential markets of those customers. When those markets bomb (DVD - at least for the time being) then poof there goes the fab utilization number. Another big thing related to this is the absence of good design tools. My sense is that this absence is plaguing LSI big time and making their designs very labor-intensive. I don't know how LSI does their accounting but I would guess some of these costs go to R&D wouldn't you think? Maybe the lack of tools and the long time it takes to design the complex chips that LSI targets are the reasons LSI's R&D is so high? To put this into perspective we'd all be much richer if LSI's R&D went down to say 14% instead of the 16-17% range it's in now. Of course I assume that the quality of the work would remain the same just that they could do things a lot faster if they had better design tools. --- Talking about the fab utilization number I was under the impression that LSI could do around 420 million at a 95% fab-util. rate. That would mean that at their current 80% fab-util rate thery are doing 350 m. / qtr. But this does not jive with the flat revenue projections. Therefore: (1) I heard the 80% wrong. Perhaps the quarter averaged at 70% and only recently has it gone to 80%. I know I heard 80% fab utilization rate. (2) the 420 million at 95% fab-utiliz. is wrong. But I don't think so because in mid-1997 that's what I remember working out based on their poor fab-util. rates at the time. (3) Heck we have price-deflation. And even though the fab would run full today the chip prices have gone down and so the q. run rate for 95% fab util would plummet. Makes some sense to me though I think LSI is not as subject to these dramatic price shifts as the MUs of the world.