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

To: lazarre who wrote (1734)	9/29/1998 8:28:00 PM
From: MoonBrother	Read Replies (2) \| Respond to of 4710

Needham's Analyst's Latest Comment - We believe that any negative move in Vitesse's stock price in reaction to this announcement from Nortel should be treated as an opportunity. ----------------------------------------------------------------- 05:22pm EDT 29-Sep-98 Needham & Co. (David Wong, Ph.D.) VTSS PMCS LEVL AMCC Communications Semiconductors: Impact of Northern Telecom Revs Concerns Needham & Company, Inc. 445 Park Avenue, NY 10022 (212) 371-8300 Equity Research Morning Note David Wong, Ph.D September 29, 1998 (212) 705-0314 Dwong@needhamco.com Ryl Ashley (212) 705-0406 Communications Semiconductor Industry Impact of Northern Telecom Revenue Concerns Summary * We think that news from Northern Telecom's analyst day today caused concerns about Nortel's revenues. * We do not believe that stock price drops in Vitesse (VTSS, $24 3/4, Strong Buy), PMC-Sierra (PMCS, $33 1/2, Strong Buy), Level 1 (LEVL, $22 , Buy) and AMCC (AMCC, $13 9/16, Buy) are warranted. * We think that high speed wireline (broadband) remains strong at Nortel. Wireless and traditional telecom switching equipment are somewhat weaker. The broadband market is most important to the wireline companies that we follow. * Vitesse has negligible sales to Nortel. * AMCC has high exposure to Nortel, with about 20% of revenues coming from Nortel. From a conversation with AMCC management today we understand that AMCC has not seen any weakening in its business with Nortel. This is consistent with continued strength in Nortel's broadband division. * Nortel is a customer of PMC-Sierra and Level 1 but we do not think that it is an important customer in either case. About 3% of PMC-Sierra's revenues are in sales to Nortel. Discussion Northern Telecom held an analyst day today, which we believe led to investor concerns over Nortel's revenues. Nortel said that they expected double digit year over year growth in the September quarter. This implies a sequential decline in revenues from the June 98 quarter, unless the year over year growth is 19% or greater. However, our understanding of the situation at Nortel is that there could be some weakness in wireless and telecom switching, and that Nortel's broadband business is in fact still strong. We would like to address the exposure to Nortel of Vitesse, AMCC, PMC-Sierra, and Level 1. Vitesse sells almost nothing to Nortel. Vitesse's largest customer (at 20% of total revenues) is Lucent, which made positive comments at an analysts' day meeting recently. We believe that any negative move in Vitesse's stock price in reaction to this announcement from Nortel should be treated as an opportunity. We are expecting sequential revenue growth for Vitesse of about 17% in the September 98 quarter with a strong book to bill of 1.17. We reiterate our Strong Buy rating on Vitesse. AMCC has more exposure to Nortel than any other company we follow. About 20% of AMCC's revenues are from Nortel. We spoke with management at AMCC today, and believe that the company has not had any slowness or pushouts of orders from Nortel. This would be consistent with indications of continued strength in Nortel's broadband business. We reiterate our Buy rating on AMCC, though we think there remains some risk that the market could react negatively to the Nortel news. PMC-Sierra and Level 1 sell, we believe, small amounts to Nortel. About 3% of PMC-Sierra's revenues come from Nortel. We reiterate our Strong Buy on PMC-Sierra, and our Buy rating on Level 1. ---------------------------------------- Well, if you have sat out the last round when VTSS dropped down to low 20s and regretted in the last couple days, you are so lucky that now you've got another excellent chance to jump in. DON'T WASTE IT AGAIN!!! You probably have at most another day or so to fill your order at below $25, so do yourself a fortune by buying into it tomorrow! For those who already bot last week, don't worry. Simply sit out for couple weeks and I will guarantee you that you will have chances to make money at mid-30s. Good luck everyone! MB