To: FuzzFace who wrote (13986 ) 7/30/1998 11:34:00 AM From: Jock Hutchinson Read Replies (2) | Respond to
Not only does Playstation account for less than 10% of LSI's revenues, but one can safely assume that it also accounts for less than 10% of LSI's profits given the breakout on the recent quarter. Specifically, one must remember that consumers is a part of slightly lower margin contracts won by LSI rather than the higher margin work in networking. Thus, it is likely that Playstation accounts for less than the percentage of revenue that it generates. But that is not all. When Symbios is completed, Playstation on a pro forma basis will account for no more than 6% of LSI's revenues. Let me see now. One company is making 25% of its profits in a product, and the other company is making 6% of its revenue/profits supplying that company a key component for the product. Who has gained a better hand in negotiations? Better yet, given Playstation II's near guaranteed success, who can now afford to give Sony a better deal simply because it has added 50% to its revenue stream with the deal for Symbios that will be accretive to earnings in '99? Therefore, the addition of Symbios cuts in half the possibility of all four groups having a bad quarter. Obviously this is mitigated by the fact that there is some sort of seasonality-most notably in consumers. However, the addition of one division does add stability to the earnings stream, which in turn adds stability to shareholder value. Shareholder value of course means better employee earnings given the numerous employees at LSI who are in line for options.
