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Technology Stocks : Vitesse Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (1246)	3/4/1998 7:03:00 AM
From: gda	Read Replies (1) \| Respond to of 4710

On valuation and other issues Michael, You seem to have taken several statements I made out of context. I said that Vitesse is a niche company. Its potential growth is limited. I did not say it will stop growing tomorrow! I showed you that even if they max out their capacity with Fab II they are limited to $300M - $400M, far from the $800M posted on this board. IMO VTSS will eventually reach its industry level P/E which is around 20 (see LSI Logic for example). When this happens, they may be an attractive target for aquisition. At the moment, at P/E of 50 they are way over industry average. How do I reach my valuation? to answer "slob" (your post is rather incoherent I must say), consider this: If you have $2B to invest (the current VTSS cap) you can buy CD's at 5 - 6% and earn $120M a year risk free, right? Vitesse is generating $30M - $40M a year currently. If they grow at 40% a year and manage to maintain their GM (which is very difficult to do) they will need 4 years to get me the income I can get from CD's today! I'll need several more years to make up for the lower income years. This is clearly an unprofitable proposition for my $2B don't you think? My conclusion is therefore that the stock is overvalued today which is why I shorted it at $50. Now we all know too well that valuations seldom reflect the economics of the stock, but rather are formed by hype, bull market mania, speculative MM's and other factors. Otherwise, this would be boring wouldn't it. peace. gda