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

To: patrick tang who wrote (14134)	8/10/1998 2:58:00 PM
From: Jock Hutchinson	Read Replies (1) \| Respond to of 25814

Patrick: A few random thoughts. The depreciation on Gresham starts at $16 million in 4Q '98 and ends at $25 million in 4Q '99. The most recent short interest that I saw posted on LSI was a couple of weeks ago in Barrons, and it was its "usual" 3 million plus. The only time it was significantly higher in the past eight months was just after the April CC, and those additional shorts made some very serious money. Since I am for the time being a glass is half full investor in LSI, I am wondering if Gresham wouldn't be able to take some foundry work in the middle part of the next upcycle from Japan's ASIC providers. The POSSIBLE scenario I envision is ongoing disinvestment in next generation Japanese fabs to the extent that there is a shortage of deep sub micron capacity for the Japanese ASIC chipmakers in late '99 or '00 (pronounced double ought?). I am not advocating this as a solution for any short-term overcapacity problems at Gresham, just wondering what the various uses of Gresham can be. Hypothesizing about this led me to wonder if LSI took any foundry work in the "glory days" of '94 and '95. I am also wondering what percentage of CoreWare accounted for their revenues in those two fiscal years.

To: patrick tang who wrote (14134)	8/10/1998 7:50:00 PM
From: Hightechhooper	Read Replies (2) \| Respond to of 25814

Patrick, The impact of Gresham is not limited to the incremental $16M in depreciation. You have to add another 10-15M per qtr for the cost of the people who will work there and the other operating expenses of the facility. Currently this is being capitalized as start-up expenses. It is the combination of these expenses (about 25-30M per qtr) that will drive the gross margin into the low 40's for Q4 and beyond. It has been a long time since LSI has had revenue growth of this magnitude, so look for eps to fall after Q3. I still suggest getting out on any hype rally and then buying back at lower prices. You missed one hype rally already last week and you may not get another chance for a while given current asian concerns. good luck,