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Technology Stocks : Broadcom (BRCM) -- Ignore unavailable to you. Want to Upgrade?

To: Patriarch who wrote (430)	11/7/1998 12:18:00 AM
From: mmeggs	Read Replies (1) \| Respond to of 6531

Pat: Thanks for your work on the thread. Your diligence is truly appreciated.

To: Patriarch who wrote (430)	11/7/1998 9:38:00 AM
From: Trader Dave	Read Replies (2) \| Respond to of 6531

Pat, Tell me how to properly value Broadcom? It's a great company, no doubt. However, It's trading at nearly 100 times 1999 estimates and is a merchant semiconductor company. It has a small number of extremely large customers and does 80% of its business with its top five customers. It supports 3COM in the fast ethernet business, a market segment that faces often unpredictable demand and pricing pressure. In addition, the company could be subject to aggressive competition from level one or lucent microelectronics. The cable modem business is a vast grower, but with standards now emerging, why won't end user pricing (and therefore merchant semi chips in the space) be subject to the same rapid price collapses we witnessed in the analog modem business a few years ago? (Something I witnessed as I watched PMCS exit the modem segment of their market.) The valuation leaves no room for execution error and one minor change in wins from its partners and this thing gets a 25 multiple. Don't forget what happened to GALTF or MMCN. PMCS doesn't compete with BRCM, but it's end markets include ATM WAN and SONET infrastructure a target market with far longer product cycles and many more companies. PMCS has a similar underlying growth rate, much less dependence on any single customer and it's end markets are much more stable and established. It trades at around 35 times 1999 estimates. Tell me why brcm deserves such a massive premium? TD