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Technology Stocks : IDTI - an IC Play on Growth Markets -- Ignore unavailable to you. Want to Upgrade?

To: Rob S. who wrote (8871)	6/13/1998 9:58:00 AM
From: Samuel R Orr	Read Replies (2) \| Respond to of 11555

That, as usual, was a nice, detailed, and clear summary you gave, Rob, on the semiconductor industry. There are two of us who don't believe IDTI will go bankrupt. Overcapacity is overcapacity, whether it be pigs, wheat, automobiles, sweet crude, DRAMs and SRAMs, or even microprocessors. I noted in the NY Times, of all places, that Hyundai recently stated it would temporarily shut down fabrication of DRAMs, and the article said the company hoped both Samsung and Lucky Goldstar would, too. Since the price of a 64M DRAM has fallen from around thirty bucks to nine bucks in little over a year, Hyundai's decision, as well as TI's to exit the business, make eminently good sense. But if one looks at the number of 64M DRAMs being sold, the industry is enjoying boom times. It's just impossible to make any profit on them, and easy to lose your shirt. We consumers are the beneficiaries. Around two hundred years ago in Europe, there was a tulip bulb get-rich-quick craze. Look it up. That financial mania reminds me a bit of what is happening today. I looked at the price of Lucent, an excellent company that will probably never go bankrupt, which is around $71. With earnings of $.32, its listed PE ratio was 230 to 1. Am I the only one in the United States who looks at that and quietly shakes his head? How could any stock analyst with a conscience recommend it or any stock fund manager worth the minimum wage($5.25 an hour?) buy it? Many of the Web -growth companies have PE multiples nearly as bad, and I happen to think that both DELL's and INTEL's earnings will soon drop considerably. The whole business sometimes seems predicated on the "Last Man Out" theory, which means everyone else will make a nice profit and the last man will be left holding the bag. In terms of all this speculative insanity, IDTI looks like an appealing investment to me. Its book value is close to the price of the stock, the product line is diversified, and they're trying to bring capacity on-stream in time for the next industry pickup. As long as the IMF is able to control its funds so they aren't used to build new .25 micron, brick and mortar fabs in Korea and other spots in Asia, IDTI should do nicely in the upturn. Beyond that, a week or so ago someone mentioned Mostek as an example of what can happen to investors. I once worked for Mostek, and still have friends who do work for it under the name of SGS Thompson. Mostek was used as an example of a company that went under. I would like to point out that before going under they were bought by United Technologies for a very high premium and stockholders did well. United Technologies later sold it to the European companies whose name it now bears. Mostek's former president, L. J. Sevin, went on to found Sevin-Rosen Venture Capital which has a legendary record (Lotus, Compaq, Cypress, Crystal, Convex, ...). Most of them have done very well. Convex didn't quite make it, but was sold for good money to HP. Tune in next week to see how the plot develops.