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

To: Grand Poobah who wrote (13041)	6/13/1998 11:43:00 PM
From: SidStock	Read Replies (1) \| Respond to of 25814

GP, Good point on the design expertise. Its not that easy to clone anymore. Not only are designs getting bigger, but the current generation of elec design automation tools are having a much harder time with the smaller geometries (.25 and below). Designing at .18 um is much more difficult and takes a lot more design iterations to get a working layout. Current tools are based on the assumption the gate delays out weigh the interconnects, but at these small sizes, it is the other way around (ok...copper is supposed to help here). Sorry got a bit offtrack... just trying to support your positon... Anyways i740 is a great example of trying to buy into a tech and basically failing (for the time being). Here 3 design teams in different companies/locations, with different tools/flows tried to bring together a single chip. The thing was what a year late, poor performance, yada yada.... now they are just using their muscle (like get a free pII if you buy our i740) to get rid of these pieces of silicon. But, it eventually will pay off for intel... something called marketing muscle, integrate it into a north bridge... bingo! On the engineering thing though, i'de have to agree more with K's comments. Intel has the best fabs and process, but i also am not that impressed with their design teams, even outside the auburn/c&t/real3d fiasco. If you saw say a startup like nVidia, you would see quite a difference. Much less engineers using more advanced tools (and fabless i might add). Intel's solution... throw armies at a chip... and through brute force... we get it done. Hey whatever works i guess.... well it almosts works... merced is another one that... well looks like late again. Sid

To: Grand Poobah who wrote (13041)	6/15/1998 2:30:00 PM
From: Hightechhooper	Read Replies (2) \| Respond to of 25814

GP, I would have agreed with your comments about the difficulty of cloning or purchasing design expertise just 6-12 months ago, but as I have mentioned before, I think we are in the middle of a paradigm shift in the industry where this perceived barrier will become much smaller in reality because there are just not enough growth opportunities to keep all the suppleirs happy. Your example about the INTC graphics entry actually supports my point. As I see it, the issue isn't about building the BEST part, but simply being able to build a functional part. Having a part that is simply functional will give end customers the leverage they need to get significantly reduce pricing on the BEST parts. Look at what has happened to the graphics industry, pricing has completely collapsed. Although the quality of the INTC part may be in question, the fact that it is available in large quantities has made that market segment very ugly. Easy access to alternate designs caused this to happen. Now look at the DCAM market....LSI may very well have the best, most highly integrated part, but there are many other options available to end customers that may not be quite as good. This environment will prevent LSI from charging prices that allow it to fully recover its very large investments in R&D, fab expansion, etc. This is further supported by the fact that LSI has not attracted very many customers and all the big names in the industry have partnerships with other IC suppliers and anyone with even the smallest amount of IP in the video area is targetting this market or looking to license its IP to volume manufacturers. The DVD market is similar. LSI may very well have the finest part available on the market but the fact that so many others are targetting this segment in their quest for growth will ensure that end customers have other options available to limit manufacturers pricing ability. The delays in the launch of this market are only giving others more time to catch up to LSI. We see the same thing in the LAN market, LSI recently took 3 com business away from NSM because NSM tried to go with a straight analog approach versus mixed signal. However, NSM turned around and acquired comcore in order to obtain the cores necessary to put a competitive product back on the market by Q4. This is just a six month cycle time from them losing the business to them acquiring the IP to develop a competitive product and getting it into volume production. Will NSM get the business back? Who knows, but the fact that they will offer a functional alternative will give 3 com all the leverage in the future and will prevent LSI from controlling the margins in its business model. The loss of the echo star business is yet another example of the competition I am speaking of, just too many vendors chasing too few designs. Finally, look at LSI itself. How many cores do they license from 3rd parties to add to their library vs cores they design themselves? It is becoming increasingly more cost effecient to license from others rather than develop yourself. This type of broad availability will likely make it very difficult for anyone to establish much of a lead in any high growth market segment. I could go on, but these of some of the reasons I feel we are at an inflection point in the industry and why I think the transition of IP from one company to another is becoming easier everyday. This ease of availability combined with the very competitive environment that will cause more people to focus on the same area may well prevent the return to historical growth rates for both the industry and LSI for years to come. That having been said, remember I still believe LSI price will go up more than it will go down from this point, but it will likely not return to its historical highs for a long time. That doesn't mean it is not worth investing in... Good luck, K