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

To: shane forbes who wrote (9917)	2/19/1998 5:57:00 PM
From: shane forbes	Read Replies (2) \| Respond to of 25814

SH lost the predecessor to the previous post... Here it is (again): ------ A Tale of Two LSI's by Charlie's buddy - Angie Dickinson** Trying to figure out why LSI is sucking wind, it hit me that LSI is still really not one company but two: (a) "Commodity" Gate Arrays (b) Standard Cells (Coreware) Here's how the 2 companies stack up in 1997 revenues: (a) 780 million (60% of total revenue) (b) 520 million (40% of total revenue) Here's how the industry growth rates of the 2 LSIs compare: (a) 9% (b) 30+% But LSI the grand-daddy is giving up on (a) and emphasizing (b). So for LSI's 2 companies I figure the growth rates are: (a) -8% (b) 35% ---- Now if you owned stock in company (a) how much would you pay? (a) has very little in the way of profit margins after all gate arrays are a cut throat business. Sales are declining. Heck I'd pay very little! What about company (b)? Growing at faster than ALTR, VTSS or any one else you care to think up in the industry! Very good profit margins. Intellectual Property protection. Long customer relationhsips. (The above rates are revenue growth rates not earnings growth rates.) I'd pay a lot! a very lot!!!! ---- I'll give the companies the following valuations: (a) 0.75 times sales (similar to AMDs 1.25) (b) 5.00 times sales (similar to ALTRs 5.60) ---- Now let's put Humpty Dumpty together again, unite the disparate pieces if you will: Combined 1997 Baseline Sales Ratio: 2.45 Growth rate for this year: 11% (assuming -5% for (a) & 35% for (b)) Growth rate for next year: 15% (assuming -6% for (a) & 37% for (b)) Not exactly the stuff dream valuations are made of. (Again the growth rates are sales not earnings.) ---- continued later... (see 9917 - these are out of order)