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

To: E. Graphs who wrote (13824)	7/23/1998 6:09:00 PM
From: Jock Hutchinson	Read Replies (8) \| Respond to of 25814

Notes and thoughts from the conference call Really brought out the entire team Highlights from press release 330 Million up one percent from previous quarter 23 cents a share v 22 cents from previous quarter Visibility is flat for 3rd quarter 4th quarter stronger R&D 64.8=19.6% Asset to price very cheap Wilf: Yen reduced sales by 4.2 mil-unit volumes up GM up to 46.7% Operating expenses reflect China opening Merit raises up this quarter R&D up because of Santa Clara. conversion to 8" BB just over one. June was slower than expected Communications were strongest design wins double from lastquarter. Key wins in CDMA Consumer market video games just starting pre-Xmas manufacturing ramp 98 revenues will be quiet due to previous pricing agreement in this segment He adresses Sony 11% of revenues. It was 22%Fileed with network revenue DCAM is now shippting as is DVD, which ramps. DVD best estimate is 2 million shipped, and LSI will have 25% of this. Other DVD shippers are from indigenous set manufacturers. Expect to gather momentum Computer sector (non PC) delivered print design to a major printer manufacture-a multi function peripheral product will connect to Internet FibreChannel design wins gain momentum leader in design wins Symbios position in storage He will devote some time to it today as to why storage is good area. Utilization exceeded 90% this quarter (Great News! Will need Gresham) Gresham comes on line in October with shipments Industry outlook is challenging Fundamentally it is flat-tough to predict an upturn. Will happen in next few quarters 3 Q is flat Strength is Sept time frame 4Q will be stronger Right markets with right products Comments on Symbios-major Q3 item 600 million is revenues Focused on storage. Received FTC clearance verbally Will close 3rd quarter Still limits on what they say. Will talk in broad terms John Dahner Talks about LSI strategy going after high growth markets, and grow into the markets.-telecomm and networking. Games and other products. Computer servers. Wireless for voice and data and system storage. Storage is new market for LSI Had little market there. Have strong position in Fibre Channel triple this year over last year. Over 25 million Symbios had additive SCSI product line with IP content. They have nearly identical customer base such as HP SUN IBM and CPQ. With customer relationship they think they can accelerate Symbios sales. Not demphasing other markets. View it as a strategically growing a market that has a strong product line. Hugh Durton. Symbios is strategic move increasing storage position All of first tier OEM.have Symbios Accelerating position in the market by 3-5 years.. (This is important!) Most of the growth is coming from NT Workstations. CPQ has one Symbios in servers VERY LITTLE TIED To PC as opposed to ADPT.(You can believe LSI or you can believe K the Invstor-take your pick) Windows NT is very strong part of this market Will be 30 times current market in two years. Increasingly way to differentiate from Intel. More than simple combo. Lots of intellectual property. LSI has same customers, but no overlap. Symbios is not overseas that much so this gives a big boost from LSI Questions Terry Ragsdale JP Morgan What is your view Wilf?Are we done with OEM inventory reduction? Or do we have a broader demand problem.? Wilf: Networking is strong. Not much inventory is in the pipe. End demand may be a slight problem. When looking at Asia, and direct business, in some of the sectors you are seeing the secondary effect of Asia where Japanese and Koreans are not buying equipment from US customers. Fairly strong US demand. But a bite into US equipment suppliers. What is effect of Gresham? WasSony formely 17% of sales? What is it now? And is that a decline in pricing? Wilf: Sony has 20 million a year. Overall revenue with reduction in Yen He adds yen will help going forward because American companies cease to be competitive Bottomed on pricing Gresham adds 16 Million to depreciation to the 4 Q It will ultimately get up to 20 million over 4-5 Q Sanford Bernstein. How much margin erosion with start up. Can production be shipped into Gresham?. Within next few weeks they will go through Symbios due to Sherman Act Will have a special meeting for analysts. K will spin this.K apparently thinks that our laws can be subverted. What is the status of Symbios manufacturing? They are starting on .35. Wilf expects them to look to Gresham next year for.25. but many SCSI products need to be a .5 Gross margins have risen will be mid 40s. Will be back to low 40s in 4 Q. (This is not good new for 4Q, although the bottom line will be better Erica Klauer : How much was cost of goods impacted by the yen? 100 basis points. Breakout of sales is 50% international roughly split into single digits in non Japan Asia rest is split between Japan and Europe . Will have 4 segments that should approx. 25 % Soundview This 3 or 4 Q outlook does not have Symbios? Answer: Correct. Drew Peck of Cowen Why was SG&A up over from quarter to quarter? Answer: Sales office openings. SAP system in Q2 Merit increase in April Expect SG&A will be flat in absolute dolars going forward.. Goldman Sachs What about Symbios non storage business? They have some wireless. They have some no storage. Gruntal Market product type? Video games expect volumes to be equal to 97. DVD with higher volumes in Q3.source decoder. Set top box is steady. DCAM went into volume. Yen deterioration will hurt Networking looks very bright. Sony was down 2 million due to Yen pricing. The rest ws step pricing, which is now at its low. Sony is not just Playstation. Playstation will be stronger second half. Will Q4 be a consolidation of Symbios? Answer: Yes/ Edelsone If you just look to 4 Q, what kind of turn potential is there as you exit Q3 and go to Q4. Answer: Ramp on DVD is less than expected. It was 750K last year. Next year will be strong for DVD. Won't see seasonality next year in DVD. Once introduced you will see little seasonality. With DVD, the stuff is flying off the shelves. For '99 will see a rapid quarter to quarter growth. Are designed into most of still cameras companies. Single chip gives to 4 million pixels. Is there turns potential? They are good says Wilf. DVD will double next year. In terms of ASIC for Fibre Channel have 80 % of design wins. Will extend powerful fibre channel lineup. Look at Q Logic. Why low margin in Q4? 16 million for Gresham is gross depreciation . 6 quarters in 99 It's an increment of 25 million. Returns to 4 Q Capital ex for year 360 million, might be less next year. A little depreciation next year DLJ What % came from coreware? Answer: Over 30% Revenues is about 30% What about competitive front. LU in your accounts and pricing accounts? Answer: Wilf says there are a little different . We meet IBM at the high performance end of computers. LU is down the food chain in telephone infrastructure. In consumer it's all of the Japanese. In terms of most price competitive it's lower complexity. IBM is a technology competitor rather than a price competitor. LU now that they are buying networking are becoming less competitive in semi area because their competitors don't want to buy from their competitor. No one single competitor. Prudential Average lead times were 14- 16 weeks this quarter. End market splits re Symbios will be around $600 million of which it's 200 million storage and 400 million storage. He expects exposing Symbios to their distribution will have positive effect. System business is doing quite well. Tom Kurlak. In light of Sony decline which is now only 11% of total business (This is all business, so K's bull jive about losing Playstation and 20% is just that jive).,please talk about communication sector. Answer: Comm segment was above 120 million in revenue. Good trend to build in networking. Telecom grows. Wireless continues to grow. Networking space says size of design is growing. Most of the gain occurred from networking Earnings in 4Q Visibility has pulled in a little bit. It's like breathing in and breathing out. (My sincere impression is that Kurlak is a thinker compared to other analysts who are performers) Montgomery asks about relationship with Q Logic. Answer: We are close with Q Logic Have collaborated with them with a number of customers. (So much for K's claiming that Q Logic is stealing LSI Fibre Channel wins) Q logic is board level. LSI is component and subcomponent level. Will offer cores to their levels. Advantage in storage business is ADPT which had no enthusiasm fo components business. LSI does QLogic is enabled by Sybios purchase Interesting sidelight to the call is the revelation to me that competing customers intellectual property needs to be protected. This is part of their infrastructure. They actually produce product lines that compete with their own products. In response to question about cable they said they are undergoing extensive and strategic planning process. I urge all of you to listen to the call and mentally compare notes with what you have read on this board in the past couple of months and decide for yourself whether LSI fits into your long-term plans.