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To: getgo234 who wrote (14807)	9/7/1998 5:08:00 PM
From: Jock Hutchinson	Respond to of 25814

Getgo: LSI has brought down the price of the Sony MPU by about 50 percent over the course of the contract. That would not be uncommon in the chip industry. Furthermore, it was announced at the last CC that the price would go no lower. The lowering of the price reflects the fact that the Playstation MPU has been enormously successful, and when a certain volume was reached, the price would fall given the substantial profits LSI realized on this project. I would also like to point out that it would seem that a five percent decrease in sales should not result in a near 50% cut in profits, but certain costs were already committed to this quarter prior to the near universal decline in orders by the various high-end American manufacturers.

To: getgo234 who wrote (14807)	9/7/1998 7:11:00 PM
From: DavidG	Read Replies (1) \| Respond to of 25814

Getgo, Wilf did indicate to us that as the Sony chips matured they expected lower production costs and therefore contracted a lower price for each of the chips. Wilf also indicated that although the revenues will drop significantly for the second year prices the margins on those chips will remain high...and that is the bottom line which we should really look at. I believe the author of that article was putting a negative spin on these Sony facts... Now these ARE specialty chips but look at how rapidly the DRAM chips production costs are reduced as the linewidths and testing are improved...more than double the percentage of these drops. Remember Wilf's positive spin? The margins are still high on the chips but the revenue for Sony Playstations is now less than 10% of LSI's overall revenue. Also the "LSI shorters will not be able to use those false Sony rumors to manipulate the stock"...(maybe not a direct quote but pretty close) DavidG