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To: M. who wrote (13581)	7/15/1998 10:47:00 PM
From: Jock Hutchinson	Read Replies (2) \| Respond to of 25814

M: R&D will hurt this quarter's earnings. One of the impressive issues pertaining to R&D is that if LSI had kept R&D even with its revenue for the past three years, it would be reporting about $1.75 in earnings for this year. Instead, LSI invested strongly in its future, and it will be extremely well positioned for the next cycle up in semis. How long will it last? I don't know, but when it starts, LSI will be a superior investment for a long-term investor such as myself, and it will be a great trading vehicle for my friend K. Bonuses will also hurt this quarter, since they are are paid out this quarter. Moreover, next quarter will take a hit because of Gresham and Symbios--although 1.2 times sales beats the price of every single semi stock that is listed under the SI semi category--by a long shot with the exception of VLSI which is trading 1.6 times sales. The one thing I know about semis is that the market will not wait for absolute hard evidence in terms of announced earnings to move this stock either way. Best example of that was February 1996, when LSI announced record earnings for the quarter and the year. The stock that day had climatic selling resulting in a price of 22. Four months prior to that, it was priced in the mid sixties. At its current price, it's an exquisitely easy bet to make 30% over the next year. Bettors call it a "Mooch lay me down" or a "Mortal Lock". Why try to time your move into this stock, when a major move to the upside can be made in a two week period?

To: M. who wrote (13581)	7/15/1998 11:38:00 PM
From: Hightechhooper	Read Replies (1) \| Respond to of 25814

M, Good job on the notes from the last call. Just a few things to add: 1) LSI hasn't sold any gsm parts yet and no design wins have been announced. GSM revenues always seem to be 6 months out. During Q1, he said they would be in second half 98. I think they have slipped to 1st half 99 now. 2) DVD and DCAM are just now shipping. They expected "high single digits" from them this year as % of total sales. Given the very disappointing DVD environment and Japan economy, I think that number has to come down to 5% at best 3) Telecom was at an alltime high, not wireless. Telecom is mostly telephone equipment companies. Again, LSI has no meaningful wireless business right now as I understand 4) Most important of all, Corrigan had a very similar list in April of 1997 as you recall. Then the debactle of october hit when none of the expectations could be attained. This is likely why the stock isn't moving now. People see that the fab is now equiped, lines are being commissioned, the place is fully staffed. They can't delay the opening much longer, so if those hoped for revenues don't come through, earnings will go to almost nothing in a heart beat. I personally don't believe that will happen, but given LSI's track record plus the industry wide slowdown there are a lot of doubters out there. Confirmation that business will grow sufficiently to cover these new fixed costs in the shortrun is what is required to get this damn thing moving. LSI put this thing in pergatory by refusing to shed meaningful light on that topic. On the 23rd the light will be turned on, but it should have been burning throughout the whole qtr IMO because this issue is so critical to the company and how it is perceived. That was the message that the analysts and investors gave to lsi in october of last year, but I don't think they heard it.