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To: Michel Eftimakis who wrote (2909)2/11/1998 5:43:00 AM
From: Kevin Hay  Read Replies (2) | Respond to of 6565
 
re: pricing model, e.g. LSI v. VLSI (chat)

Michel, I tend to agree with you. I'm trying to develop some
kind of pricing model and would be very interested in what
works for others. Personally, I've been working with discount
to growth rate as my primary screen. This too shows VLSI to
be WAY more attractive than LSI.

But LSI has all that cash and is 'bigger', and at least has a
perception of being more high-tech.

VLSI's 'predictability of earnings' is obviously a negative. But
then again, LSI dogged a lot of people last q, me included.

For me, the subject is much bigger than these two companies.
Look at MSFT, what's up with that valuation? big stack of
cash plus predictable earnings plus market leader = higher multiple.

I'd be curious what a statistician with a large enough database
could uncover about pricing factors. A stock with a nice discount
to growth rate gives me a warm-n-fuzzy, but I'm well aware it is
only 1 factor. It seems to me the other most important factors are
predictabillity of earnings, market leadership, and then balance
sheet factors. This is only my perception.

comments/input? thanks,
-Kevin

PS. thanks to TomVeal for his reply to this query on the cgnx thread.



To: Michel Eftimakis who wrote (2909)2/11/1998 7:11:00 AM
From: shane forbes  Respond to of 6565
 
The perceived risk is different.

VLSI has made mis-steps in the past and this is plaguing the company's valuation.

Also there may be something (similar to LSI) about the dependence on a single customer. For VLSI this is ERICY, for LSI this is Sony.

Finally there is a perceived concern about the communications area because Asia is a sizable consumer of these chip-sets. Whether true or not time will tell.

Both should participate in the long term SOC revolution.


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