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Technology Stocks : VLSI Technology - Waiting for good news from NASDAQ !!! -- Ignore unavailable to you. Want to Upgrade?

To: Hashem Akbari who wrote (3813)	7/7/1998 12:36:00 PM
From: DanZ	Respond to of 6565

Hashem, Thanks for your comments. I agree with most of what you said, especially the part about the fixed costs and sensitivity analysis. As I wrote yesterday, small changes in COGS, R&D, and G&A have a big effect on the bottom line. I'm comfortable with my COGS estimate and think there's more room for error in the R&D and G&A estimates. The R&D has been going up steadily but I think they could have made a conscious effort to reduce it back to the December quarter dollar figure. The big unknown is G&A. How much did they cut? Changes in revenue don't have as big of an effect on the bottom line as long as they stay close to $140 million. For example, on revenues of $135 million, my estimate goes down to 8 cents. At that revenue level, I increased COGS to 60% of sales. I think this is reasonable considering that their COGS was $82.94 million in the March quarter and 60% of $135 million would make COGS $81.0 million. Financial forecasting is very difficult as you noted. This is the main reason that I prefer to use technical analysis because the chart can give you clues about what to expect. However, I have such a large position in VLSI that I augment my TA with financial analysis. I think the more ways you look at something, the better off you are. At the moment, both my TA and FA are saying buy this stock. The TA breaks down a little if the stock doesn't hold 15 3/4 to 16 1/4. Below that and I think there is a big risk that it will fall back to 14 3/4 to 15 but I think the odds of it trading below 14 1/2 are very low. Dan