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Technology Stocks : Vitesse Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: OldAIMGuy who wrote (1618)	9/17/1998 7:53:00 PM
From: Immi	Read Replies (2) \| Respond to of 4710

Silicon Valley: Montgomery Notebook: Applied Micro Circuits By Marcy Burstiner and Joe Bousquin Staff Reporters 9/17/98 5:46 PM ET SAN FRANCISCO -- Will it be galium or silicon? Applied Micro Circuits (AMCC:Nasdaq), CEO David Rickey showed fund managers a long list of competitors in his morning presentation but said the only one that counted in the high bandwidth communications chip industry is Vitesse (VTSS:Nasdaq), which makes chips using galium arsenide, not silicon. Until May of this year, the two companies were the darlings of the chip sector and are still among the most closely watched of the niche chip stocks. But under Rickey's scenario, either Vitesse will be irrelevant in five years or it will morph into the kind of company that is similar to Applied Micro. Rickey thinks communications companies will soon abandon all alternatives to silicon, which, if true, would leave Vitesse in a dilemma. Galium arsenide, he said is a difficult material which can be problematic to acquire, he said. "Within five years, the GAS [galium arsenide] guys will be silicon guys," Rickey said, "or they will be doing something else." But Applied Micro has come under severe selling pressure this week. Trouble began on Tuesday when the stock took a mysterious drop, falling 17.4% to 16 5/8 on average volume. But then it recovered partially Wednesday amid heavy volume -- about four times the daily average of 285,000 -- to close at 18 5/16. On Thursday, among the market turmoil, the stock plunged again to 15 1/4, down 3 1/16. The San Diego semiconductor company says it was aware of no news that would precipitate such a plunge. "We're a bit surprised about this downdraft here," says Anil Bedi, vice president of marketing at AMCC. "We're not sure exactly why this happened." Some analysts pointed out that Northern Telecom, (NT:NYSE), Applied Micro's largest customer, was cutting 3,500 jobs (out of 80,000 total employees). Nortel accounts for 17% of Applied Micro's sales, according to Elias Moosa, an analyst who follows Applied Micro Circuits for BancBoston Robertson Stephens in San Francisco. He rates the stock a buy. (His firm helped underwrite AMCC's initial public offering.) Stocks in telecommunication equipment makers fell after Alcatel (ALA:NYSE) warned of a shortfall in earnings. Alcatel stock closed 38% lower but its impact was felt among the telecommunications industry. But Kevin Landis, co-manager of the $120.1 million Firsthand Technology Value says he's sticking with Applied Micro. "We don't react to market movements, and we don't seek positive re-enforcement," Landis says. That's good news for the company, since Applied Micro is the fund's number-two stock and accounts for 9.3% of its assets. Landis says that while some chip companies have been taking hits lately, "not all chip stocks are created equal." He adds: "When people see year-end prices falling, they say, 'Chip stock, bad.' But I think 'AMCC, good.'"