To: getgo234 who wrote (14547 ) 8/25/1998 9:26:00 AM From: Jock Hutchinson Read Replies (3) | Respond to
LSI hasn't lost a dime yet, so I would think that $.50 a share loss for '99 is a little bit premature. But your key word is recession. There have been a variety of problems that have beset the semiconductor industry, which in turn have effected LSI. Two of these, inventory correction and the maintenance of high inventory are past LSI. The next problem--overcapacity, which has plagued the industry is somewhat past, but in the case of LSI it is now a significant problem because of Gresham, which will currently add excess capacity. But would you prefer not to have Gresham? No way. LSI is on the verge of realizing major returns from its high R&D. Standard cell based products such as DVD, DCAM, Fibre Channel, Wintel servers, and high end Networking and Communications all dictate that LSI have greater cutting edge capacity. As recently as last quarter, LSI was running at 90% capacity. To not have Gresham would be suicidal. Thus, there is no doubt that the semi industry could continue to see a downturn because the current downturn has happened despite a strong overall economy. If the economy tanks, then there will be further deterioration in the semi industry. Ominously, this is precisely what the most recent LSI warning is telling us. If the downturn is in networking, you can be darn sure that a very good short-term play is buying puts in the major networking stocks the day before their next respective earnings announcements.
