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

To: John Lengyel who wrote (11903)	4/26/1998 5:49:00 PM
From: shane forbes	Respond to of 25814

John: RE: Competition is precisely why LSI's earnings will not be as good as many anticipate. Without competition LSI could charge whatever they wanted for their goods and services and would be making a fortune. Because of competition they will only be able to maintain or possibly gain market share by cutting prices. As I recall, they lost part of their Sony business last year due to competition. Too many hands in the pot. OUCH! From which universe is the above coming from!!! LSI's fixed contract basis calls for fixed product prices after the contract is signed. Thus the initial competition is from the bids and that's all. Once the bid is won then LSI is set - they can't lower but neither can they raise prices. In this model LSI's earnings are a function therefore of how well they can handle their own costs - not as you indicate by cutting prices. Since the end product per contract is fixed if LSI can bring manufacturing efficiencies to bear "good fruit" (humor), they can make good money. Two things messed them up as I understand it. From the c. call last year they had to sign up new contracts last year and because some of the other companies esp. in Asian were hurting my bet is that a lot of companiese were low-balling. Secondly there is a lag between initial ramp and high volume production. Thus earnings suffer in the n/t. LSI losing part of the Sony business??? Do you want to point me to a source here! Last year was rife with bone-headed rumors about this - the increase in LSI's revenue from Sony YOY tells me that all those rumors were unalderated BS. ---- RE: How many years now have we heard that the turn around for LSI and other semi's is just around the corner. What amazes me is that every Spring investors start believing this fantasy. October brings about the reality check. A lot of money may be made in LSI between now and then. But if we do get a decent run up I'll be out by the latest early in October. Yes you have a point. LSI has always implied "later, later, later...". But this time I heard music to my ears: "lead times up", "shortages". For any capital intensive industry this is fabulous. Tighter supply implies those fabs will be moving on up! I have never repeat never heard this in the last 2 years from LSI. In the past it has always been later, later, later. It reminds me of the Red Riding Hood effect (in reverse to some extent). People have so many times in the past said "wolf" that the time when things actually do look real no one is apt to believe it. We shall see. LSI can't be totally immune to the Asian thing. But Wilf allayes some of my specific fears about the computer segment - specifically mentioned that their computer business is no more PCs and workstations (as SUN hinted) is strong. What can go wrong? A global full blown economic recession of course. With Japan now in serious poopie who knows - weirder things can happen. But I am not one to make macro-economic calls like this. I look at one thing and one thing only - company fundamentals and to me LSI is looking real good. I'll caveat by saying I agree about your seasonal trends in the semis. That point of yours is bang on. Like the coming of the seasons that never changes. ---- Re: LSI may be a decent company. But they ain't that great Of course I disagree. But then I am biased (humor)!!! ---- Bigger implication: the market troubles and the general mayhem in the semi-commodity sector spill over to all stocks LSI included. Sure could very likely happen. Is this therefore not the greatest time to buy LSI? Sure people may be right. Does LSI by implication look overvalued? Sure some may say that. BUT does LSI's fundamental business outlook look rosier than it has ever been in the 2 years I have followed this company and is this outlook supported by hard data? ABSOLUTELY YES. This to me is more important than sector valuation, market valuation and all those other little things. I bought the LSI story 2 years ago because I was able to see just how interesting things could get for the company once the consumer chip segment took off, networking (bonus) etc etc. In 1996, when I looked into the LSI story, this was the picture perfect stock to benefit from underlying changes in the chip industry - internet, consumer etc. What I saw with this c.call's report that the fundamentals are FINALLY showing up in hard orders and extended lead times. Those "show me the money" folks will soon be happy. Brandywine come on down! --- Shane.